Over the last 2 years, the dollar has lost more than 18% of its value against the euro (sinking from $1.20 to 1.42 per euro). This foreign exchange (forex) reality means that the cost of translations into Western European languages paid by American companies has gone up by the same rate. Conversely, translations into English done by American translators for European LSPs have become cheaper.

We are in the midst of updating our research on translation pricing. Our surveys thus far have shown that LSPs have not yet transferred these increased forex costs to translation buyers, choosing instead to reduce margins or to renegotiate rates with suppliers so as not to lose business to their competitors. But LSPs tell us that they are feeling the squeeze. When the euro reaches $1.45 or $1.50, the market will adjust. U.S. translation buyers will see their invoices rise by $0.02 or $0.03 per word — that’s 10% or more of the average list price for translations.

Does anyone benefit from the free-falling greenback? Certainly not the poor American traveler. How about businesses?

• Not the large multinationals. Their production facilities are spread around the world so they arbitrage costs across their locations.
• Smaller U.S. manufacturers. Those that do most of their production and purchasing in the States and sell into markets like Europe where the dollar has had its biggest decline should do well. LSP sales reps should take note of the clusters of U.S. manufacturers.
• European LSPs. Some agencies have started buying English-Italian, English-German, and English-French translation from U.S.-based professionals to take advantage of the favorable exchange rate. Some are attending next week’s ATA Conference in San Francisco just to meet and greet qualified translators on this side of the Ocean.

Graph Source: Business Week magazine, October 29, 2007.