If you’re a European small business that imports goods priced in US dollars, you carry a risk that has nothing to do with your product, your suppliers, or your customers. It’s the risk that the euro-dollar exchange rate moves between the day you agree a price and the day you pay for the goods. When it moves against you, your margin shrinks even though nothing about the actual deal changed.
Large importers have treasury teams and hedging desks for exactly this. Small importers usually have none of that, so they either ignore the risk and hope, or they get burned once and overcorrect. Neither is a plan. The good news is that managing basic currency risk doesn’t require a finance department — it requires understanding a few concepts and using tools that are now available to businesses of any size.
This guide keeps it practical. No trading jargon, no speculation. Just how the risk works and what a small importer can actually do about it.
How Exchange-Rate Movement Eats Your Margin
The problem in one example. Say you agree to buy goods from a US supplier for 100,000 dollars, with payment due in 90 days. On the day you agree, the euro-dollar rate is 1.10, so those goods cost you about 90,900 euros. Ninety days later, when you actually pay, the rate has moved to 1.04. Now the same 100,000 dollars costs you about 96,150 euros. You just paid over 5,000 euros more for exactly the same goods, and you may have already sold them to your customers at a price based on the original cost.
Why small importers feel it more. A large company spreads currency swings across a big portfolio and often has natural offsets — dollar revenue somewhere that cancels dollar costs elsewhere. A small importer buying in dollars and selling in euros has no offset. Every unfavourable move hits pure margin, and margins on imported goods are often thin to begin with. A 5% currency swing can wipe out a large slice of a 15% gross margin.
The euro-dollar pair is genuinely volatile. EUR/USD is the most traded currency pair in the world, and it moves. Swings of several percent over a quarter are ordinary, not exceptional. You cannot predict its direction — banks with rooms full of analysts fail at that consistently — so the aim is never to forecast the rate. The aim is to stop the rate from being able to hurt you regardless of where it goes. The European Central Bank publishes reference rates daily, which is a useful neutral benchmark for tracking movement and for pricing contracts.
Know Your Exposure Before You Try to Manage It
You can’t manage a risk you haven’t measured. Before reaching for any tool, get clear on how much currency risk you’re actually carrying.
Map your dollar exposure:
- Total annual dollar purchases. How many dollars do you buy in a year? This is the size of the exposure.
- Timing of payments. Currency risk lives in the gap between agreeing a price and paying. A supplier you pay on the day of order carries almost no FX risk. A supplier you pay 120 days after agreeing terms carries a lot.
- Whether you can pass costs on. If you can adjust your selling prices quickly when your costs rise, some of the risk transfers to your customers. If you’re locked into fixed euro prices with your own buyers, you absorb the full swing.
Rank exposures by size and timing. A large payment due far in the future is your biggest risk. A small payment due next week is barely worth managing. Focus your effort where the numbers are large and the timing is long — that’s where a bad move does real damage.
Set a threshold for action. Decide the swing you can absorb without pain. If a 2% move on a given order costs you a few hundred euros, it may not be worth the effort to hedge. If a 5% move on a large order threatens the whole deal’s profit, that order needs protection. This threshold turns a vague worry into a clear rule.
Getting this exposure picture right depends on knowing your true landed cost per order, which is exactly where payment terms and shipping terms intersect — our guide to Incoterms for B2B EU–Iran trade covers how delivery terms shift who pays for what, and the same principles apply to any import route.
The Practical Tools: Forwards, Multi-Currency Accounts, and Natural Hedging
You don’t need a bank’s trading desk. Three accessible tools cover most small-importer needs.
Forward contracts — locking in today’s rate for a future payment.
A forward contract lets you agree today to buy dollars at a fixed rate on a future date. If you know you’ll owe 100,000 dollars in 90 days, you lock the rate now. Whatever the market does, you pay the rate you agreed. This removes the uncertainty entirely — you know your exact euro cost the moment you sign the supply contract, so you can price your goods with confidence.
- Modern payment providers such as Wise, Revolut Business, and specialist FX brokers offer forwards to small businesses, often with a small deposit rather than a large credit line.
- The trade-off: if the rate moves in your favour, you don’t benefit — you’re locked in. But a forward isn’t a bet; it’s insurance against a bad outcome, and giving up an unknown upside to remove a known risk is usually the right call for a thin-margin importer.
Multi-currency accounts — holding dollars when you have them.
A business account that holds both euros and dollars lets you buy dollars when the rate is favourable and hold them until payment is due, rather than converting at whatever rate happens to exist on the payment date. It also lets you receive any dollar income directly, creating a natural offset. Providers like Wise and Revolut Business offer these with transparent, low conversion fees — often a fraction of what traditional banks charge on the spread.
Natural hedging — structuring the business to reduce exposure.
The cheapest hedge is one that costs nothing because it’s built into how you operate:
- Negotiate euro pricing where possible. If a supplier will invoice you in euros, the currency risk becomes theirs, not yours. Larger suppliers often can; it’s worth asking.
- Match payment timing to sales. Shortening the gap between paying your supplier and receiving payment from your customer reduces the window in which the rate can move.
- Build a currency buffer into your pricing. If you can’t hedge, price your goods with a small margin for currency movement. It’s crude, but for very small orders it’s simpler than a forward contract.
A Simple FX Policy Any Small Importer Can Run
The point of a policy is to make currency decisions in advance, calmly, instead of reacting emotionally when the rate moves and you’re staring at a payment due.
A one-page FX policy contains:
- A hedging threshold. “Any single dollar payment above X euros, due more than 60 days out, gets a forward contract.” Below the threshold, accept the risk. This removes the agonising case-by-case decision.
- A pricing rule. “All euro selling prices include a 2% currency buffer” — or a note that prices are reviewed whenever EUR/USD moves more than a set amount from the rate used to set them.
- A monitoring habit. Check the ECB reference rate weekly, not obsessively. You’re watching for large moves that trigger a price review, not day-trading.
- A provider. Decide in advance who you’ll convert or hedge with, so you’re not opening accounts under time pressure when a payment is looming.
Write it down and stick to it. The value of a policy is that it takes the decision out of the moment. When the rate lurches and your instinct is to panic or to gamble on it bouncing back, the policy already told you what to do. That discipline is what separates a business that manages currency risk from one that’s simply exposed to it.
Review it once a year. Your import volume, supplier mix, and margins change. A policy that fit last year’s business may be too cautious or too loose for this year’s. An annual review keeps it matched to reality.
Currency risk is one of those exposures that stays invisible until the day it isn’t — when a payment costs thousands more than you budgeted and the profit on a good deal evaporates for reasons entirely outside your control. For a small European importer buying in dollars, this isn’t an exotic worry. It’s a structural feature of the business that deserves a simple, deliberate response.
You don’t need to predict the euro-dollar rate, and you shouldn’t try. You need to know your exposure, decide in advance which risks to remove, and use the low-cost tools now available to businesses your size. A forward contract on your large orders and a written threshold for when to use one will protect you from most of the damage. The effort is a few hours to set up and a few minutes a week to maintain — cheap insurance against a risk that can quietly erase a quarter’s margin.
Sources: European Central Bank euro reference rates · European Commission — trade and import guidance