0 used to describe the value of a country's currency in relation to its exports to other countries. When the value of a country's currency increases, its exports become more expensive in other countries. When the value goes down its exports become less expensive:
The pound's trade-weighted exchange rate stands almost exactly where it was when she acceded, having risen and fallen by a bankruptcy-creating 20% in the meanwhile.
The effective exchange rate index measures the value of sterling against a basket of other currencies on a trade-weighted basis.
It is not that weak historically: it has returned to the level of member currencies on a trade-weighted basis two or three years ago.
Most countries have gone down on the trade-weighted index because of the strength of the dollar.
The trade-weighted effective exchange rate index is an economic indicator for comparing the exchange rate of a country against those of their major trading partners.
In sterling terms, it fell from around 9.5p to just over 7p, losing some 25% of its international trade-weighted value in just six months.
