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A currency basket is a portfolio of selected currencies with different weightings.[1] A currency basket is commonly used by investors to minimize the risk of currency fluctuations[2] and also governments when setting the market value of a country's currency.[3]
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 measure is the U.S. 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 the Swedish krona.[7]
- ^ "currency basket". Oxford Reference. Retrieved May 21, 2020.
- ^ "Currency Basket". Investopedia. Retrieved September 18, 2010.
- ^ "Currency basket". TheFreeDictionary.com. Retrieved May 21, 2020.
- ^ Kent, Penelope (2008). Law of the European Union. Pearson Education. p. 258. ISBN 978-1-4058-3526-8. Retrieved September 19, 2010.
- ^ "Factsheet — Review of the Special Drawing Right (SDR) Currency Basket". imf.org. Retrieved May 21, 2020.
- ^ "What is the IMF's currency basket?". World Economic Forum. Retrieved May 21, 2020.
- ^ Ganti, Akhilesh. "Currency Basket Definition". Investopedia. Retrieved May 21, 2020.
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