Trade Weighted Index (1 Viewer)

[thumper123]

Help please!

I need someone to dumb down and simplify the TWI, or be more elaborate...what ever makes me understand it as I am just not getting it for some reason! I can google, and read non stop but the information is just not 'clicking'.

The textbook says it gives a indication of how the value of the $A is moving against all currencies in general.
Calculated by measuring the value of the $A against the currencies of Australia's major trading partners compared with a base year.

Then I read for example e table saying $US- 0.83, Euro- 0.70, YEN- 95.33, Pound sterling- 0.53 and a TWI of 66.7

How did the 66.7 TWI number occur?

I have read this so many times, asked numerous people/teachers but for some unknown reason I am just not understanding this concept AT ALL. The worst part is that I have to write about what would be the shifters of a TWI increasing and decreasing ect, what the current TWI is and why and what that means ect.

So without understanding the concept I can not move forward on my assignment.

Would appreciate help so so so much ! TY!

 

[muntchuriancandidate]

Sorry I know this is probably irrelevant for your assignment now, but I think your confusion may come from the fact that the TWI is not actually a dollar figure, but rather an index. An index simply shows us recent movements in something compared to a point we picked in the past. http://www.rba.gov.au/chart-pack/exchange-rates.html

You'll notice that with this graph, they've chosen 1970 to be valued at '100' for the index. so if the index increases, i.e. our currency is more valuable compared to those of our major trading partners, the index will increase. In the same way, many people measure share price changes using the same sort of index, for example http://www.rba.gov.au/chart-pack/share-markets.html Again in this case they have chosen a certain date to be 100 and we just measure movements from that point.