You Know what Happened to Nominal Exchange Rates, but What about Effective Exchange Rates?
As investors and traders, we are familiar with the developments in the foreign exchange market. In the year-to-date, the yen has gained 1.8% against the US dollar, while the euro has fallen nearly 4.5% and sterling is off by 16.3%. These are bilateral and nominal exchange rates. They are important to us. It determines the return on …