Currency basket

A weighted set of currencies used as one reference

In detail

Rather than tracking a single currency, several are combined with weights that often follow trade volumes. That reduces exposure to one country's situation, though it makes the reference harder for outsiders to read. Effective exchange rates are built on the same idea.

Example

Weights such as 50% dollar, 30% euro and 20% yen turn the whole into a single index.

Related terms

Effective exchange rate Exchange rate Currency risk

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