Thursday, April 8, 2010

Trade Weighted Exchange/Index

Assignment #2:

1. Anyone who deals with international trade would be interested in this. The Trade Weighted Index might be used to determine how much certain goods are worth, and how much to buy them for, for any country in the world.

2. This statistic is collected by creating an weighted average of exchange rates, with the weight of each foreign country equal to its share in trade. More prominent trading partners receive a higher index. In the US, this data is collected by the Federal Reserve, and is compiled every month.

3. Using the value of $100 in January 1997 as a reference point, that amount would be worth $102.8725 according to the Trade Weighted Index for March 2010. Compared to other countries, one US dollar is currently worth 1.3570 euros and 1.5058 British pounds.

The People, "Trade Weighted Index", Wikipedia
"Foreign Exchange Rates (March 2010)", Federal Reserve Statistical Release, April 1, 2010

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