Definitions for "Effective exchange rate"
An index of a currency's value relative to a group (or basket) of other currencies, where the currencies in the basket are given weights based on the amount of trade between the countries that use the currencies. Also called a trade-weighted exchange rate.
Explanation of a country's currency strength or weakness entirely on its trade balance.
A weighted average rate that is obtained by weighing the exchange rates between a country's currency and the main currencies (dollar, sterling, euro, yen, etc.) using the country's trade balance structure.