Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from Brian Alexander with Raymond James. Please proceed with your question.
Brian Alexander - Raymond James
Thank you. I will start with the currency loss in the quarter. Jeff, it sounds like the loss was largely driven by the timing of the FX movement versus any unsound hedging practices or other executions driven errors around hedging, I just wanted to clarify that, because I think Bob mentioned that you are reviewing hedging policies in some regions. I am not clear as to whether this is something that could have been prevented or if this is really just a timing issue?
Jeff Howells
Brian, I think it is a little bit of both. Primarily, the hedging policy remains sound. It is a good practice. We had many regions that had relatively flawless execution, utilizing the policy. In others, we had less than flawless. I will give you an example, if you take the example that I used in the opening comment, when we use inventories as natural hedge against payables, there has to be the assumption that we are able to move that pricing up and realize the gross margin if we have a change in the exchange rates, and of course, that could go both directions.
In this case the rapid volatility in the month of October, especially, there were two types of instances where we may not have executed as well. One is we take care of our customers and that would be, we had a quote out on a table and we honored that quote, and that quote may have resulted in us not realizing the benefit of the currency. So we quoted in US dollars. Two days later the quote was accepted and we are going to ship that product. Or it may be product that is fulfilling a rollout.
The other instances would be the sheer hourly change in the exchange rate. Where we could enter into transactions, plan the inventory during the day and look to hedge the inventory against the payable the following day and literally it could have moved several percent from midday one day to the time we could place the hedge the following day. I think it is accurate to say, although, I do not have it in front of me that in the history of the euro, October was the most volatile month, ever. In fact there were two days in October that were wild swings. So, my point is, we can not prevent a couple of those instances. One word, we honored some quotations and we will continue to honor some quotations, and two just the sheer rapid movement would cause us some losses that we can not recover.
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