5 What do you think will happen to the Thai baht’s value when the swap arrangement is completed? How will this affect Aussie Blades?

Recall that Aussie Blades, the Australian manufacturer of rollerblades, generates most of its revenue and incurs most of its expenses in Australia. However, the company has recently begun exporting rollerblades to Thailand. The company has an agreement with Rolling Products, Inc., a Thai importer, for a three-year period. According to the terms of the agreement, Rolling Products will purchase 180,000 pieces of ‘Speedos’, Aussie Blades’ primary product, annually at a fixed price of 5000 Thai baht per piece. Due to quality and cost considerations, Aussie Blades is also importing certain rubber and plastic components from a Thai exporter. The cost of these components is approximately 3200 Thai baht per piece of Speedos. No contractual agreement exists between Aussie Blades, Pty Ltd and the Thai exporter. Consequently, the cost of the rubber and plastic components imported from Thailand is subject not only to exchange rate considerations but to economic conditions (such as inflation) in Thailand as well.