Trade weighted index

You don't need to be Editor-In-Chief to add or edit content to WikiDoc. You can begin to add to or edit text on this WikiDoc page by clicking on the edit button at the top of this page. Next enter or edit the information that you would like to appear here. Once you are done editing, scroll down and click the Save page button at the bottom of the page.

Error creating thumbnail: /home/perfuseftp/wikidoc/en/bin/ulimit4.sh: line 4: r: command not found

Please help improve this article by expanding it. Further information might be found on the talk page or at requests for expansion. This article has been tagged since January 2007.

The Trade Weighted Index, also known as the effective exchange rate, is a multilateral real exchange rate which is a weighted average of real exchange rates of home and foreign currencies, with the weight for each foreign country equal to its share in trade. It measures the average price of a home good relative to the average price of goods of trading partners, using the share of trade with each country as the weight for that country.

The trade weighted index is an economic instrument used by economies to compare their exchange rate against those of their major trading partners. Those trading partners that constitute a larger portion of an economy's exports and imports receives a higher index. The trade weighted index is used to make a complete comparison between one economy's currency and other currencies it interacts with. It is a much more comprehensive analysis than comparing two currencies, such as the Australian and the US dollar.