Indicative versus Reference Rates
When a nation releases its trade weight effective exchange rate every day, this is called by most of the world an indicative rate. The ECB refers to its trade weight effective exchange rate as a reference rate. Both are slight semantical references. What is important is that the major nations factor their TWI based on a set formula with set weights and a set fixing time daily and released at the same time as mid rates. For emerging-market nations such as Brazil, the story is quite different because emerging-market nations lack a TWI. Instead, they negotiate currencies based on currency spot auctions. The currency is negotiated rather than an index price. The best example is found at the Bank of Mauritius (intnet.mu). ...
Get Inside the Currency Market: Mechanics, Valuation, and Strategies now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
