What is a Currency Basket?
Currency baskets are collections of securities with a weighted average that can be utilized to calculate the current value of any given debt, duty, or written promise. Securities of this type may also be used to determine the current value of a currency that is different from the currency involved with the security under consideration. Generally, the use of a currency basket to evaluate the current value of a currency will involve considering several different currencies in order to obtain an average performance value over a broader scope. The use of a currency basket can be very important for investors who wish to deal with currency exchange as a way of increasing their net worth. In general, the process of evaluating one currency against a different currency is known as pegging. For example, an investor may choose to compare the current value of the United States dollar to the Euro. While this approach works well when considering an exchange that only involves these two currencies, i
A currency basket is basically the mutual fund for currencies. The currency basket is commonly used as a way of avoiding the risk of currency price movement. The currency basket functions as a benchmark for regional currencies. Traders should review the details of each currency basket to see how each respective currency is weighted. The Asian Currency Unit and Russian Currency Unit are examples of a currency basket.
