Currency basket

A currency basket is a portfolio of selected currencies with different weightings.[1] A currency basket is commonly used to minimize the risk of currency fluctuations.[2] Another purpose is setting the market value of a currency.[3]

A literal basket of currency.

An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of account before being replaced by the euro.[4] Another example is the special drawing rights of the International Monetary Fund.[5][6]

A well-known method is the US dollar index, which is used by Forex traders. There are six currencies forming the index: five major currencies (Euro, Japanese yen, British pound, Canadian dollar, and Swiss Franc), and Swedish krona.[7]

See also

References
  1. "currency basket". Oxford Reference. doi:10.1093/oi/authority.20110803095653851. Retrieved May 21, 2020.
  2. "Currency Basket". Investopedia. Retrieved September 18, 2010.
  3. "Currency basket". TheFreeDictionary.com. Retrieved May 21, 2020.
  4. Kent, Penelope (2008). Law of the European Union. Pearson Education. p. 258. ISBN 978-1-4058-3526-8. Retrieved September 19, 2010.
  5. "Factsheet -- Review of the Special Drawing Right (SDR) Currency Basket". www.imf.org. Retrieved May 21, 2020.
  6. "What is the IMF's currency basket?". World Economic Forum. Retrieved May 21, 2020.
  7. Ganti, Akhilesh. "Currency Basket Definition". Investopedia. Retrieved May 21, 2020.
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