A currency's overall strength against many currencies at once
The effective rate combines a currency against its main trading partners into one index, weighted by trade volume. It can look weaker against the dollar alone while being stronger against other currencies. Adjusted for price differences, the real effective rate is used to judge whether a currency is cheap or expensive over long periods.
Falling 10% against the dollar while rising 5% against the euro narrows the effective move.
For learning, not investment advice. Decisions are your own.
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