The dollar is up 26 percent on the euro in just the last four months and some economists are speculating on the possibility of reaching parity ($1 = €1).What steps can domain investors take to capitalize on exchange rate changes? The answer is different if you are an institutional domain investor or a part-time investor, so I’ll give examples of both ends of the spectrum.

As a part-time investor, I started listing more of my domain on Sedo in euros instead of dollars as it fell against the euro in the last few years. While Sedo shows the localized price (e.g. dollars in North America, euros in Europe) on a domain listing page, when the domains go to auction they stay in the listed denomination. This helps with pricing psychology, or “perceived value” as economists like to say. While reevaluating your pricing is always a good idea, deciding whether or not to change the denomination is beneficial at various inflection points. Some that come to mind:

  • When exchange rates start trending in the opposite direction
  • When currencies near or pass though parity
  • When a target market perceives foreign-denominated items as being more valuable

The last point is important because you have to consider your target market. If you have German language domains, having them listed in US dollars for the past two years may have increased the perceived value. On the other hand, if you have a domain like USSoulmates.com which has a probable market of buyers in North America, then changing the currency to euros while increasing the price may be a good strategy.

For larger, institutional domain investors, the strategy to consider at times of major currency and localized interest rate shifts is the possibility of interest rate arbitrage. At the most basic level, an example is lending and borrowing money between currencies because of a favorable combination of interest rates and exchange rates. One way this could be executed by a domain investors is a dollar-based investor taking out a loan in euros because of an anticipated stronger dollar, and buying up domains with euros while paying off the loan when exchange rate conditions are favorable.

I wish I had the creativity to fully describe the macro-economic forces at work during a period of currency devaluation, but suffice it is to say if you are the first investor to get a loan in euros and buy up cheap euro denominated domains, you’ll have the advantage of being able to buy those domains ahead of the larger market should the exchange rates move as you anticipated.