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A currency basket is a portfolio of currencies that are weighted together in a certain proportion. It is used as a benchmark for measuring the performance of a specific currency against a group of other currencies. The composition of a currency basket depends on the objectives of the trader.
A currency basket can be used by traders, financial institutions, and central banks. A trader may use it to diversify currency exposure or to hedge against currency risk, while a central bank may use it to manage their foreign exchange reserves or to influence the value of their own currency in relation to a group of other currencies.
A popular currency basket is the US Dollar Index, which measures the value of the US dollar against the currencies of the United States’ major trading partners. This is a basket of six currencies: the euro, the British pound, the Canadian dollar, the Swedish krona, the Swiss franc, and the Japanese yen. It is a benchmark for the strength of the US dollar against these currencies.
Another popular basket is the Euro Currency Index (EURX), which measures the value of the euro against the currencies of the Eurozone’s major trading partners. This is a basket of five currencies: the US dollar, the Japanese yen, the British pound, the Swedish krona, and the Swiss franc. It is a benchmark for the strength of the euro against these currencies.
Traders can use financial derivatives such as Exchange-Traded Funds (ETFs), options contracts, and futures contract to speculate on the performance of currency baskets. They can also create a synthetic currency basket; in which case they take long or short positions in currencies in specific weights that match the composition of the currency basket they want to trade.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
