Exchange rate indices of the five major currencies, 1970-85
Source: IMF, International Financial Statistics
The two composite charts show, for each of the five currencies, monthly indices of the US dollar values of currencies and nominal effective exchange rates. Since these two indices are based on exchange rates expressed in terms of US dollars per unit of national currency, an upward movement indicates that the currency in question is appreciating while a downward movement indicates a depreciation.
The single currency charts present: (1) the monthly average US dollar value of the currency, expressed in terms of US dollars per unit of national currency, calculated relative to the currency’s average values in the base year (line ahx in International Financial Statistics); and (2) the nominal effective exchange rate (IFS line amx), which is a weighted index that combines the exchange rates between the currency in question and the currencies of 17 other industrial countries. The weights are derived from the Fund’s multilateral exchange rate model (MERM) and each weight represents the model’s estimate of the effect on the trade balance of the country in question of a 1 percent change in the domestic currency price of each of the other currencies. The weights, therefore, take account of the size and direction of trade flows as well as the relevant price elasticities and feedback effects of exchange rate changes on domestic costs and prices. The index is based on average market exchange rates in 1980.