Currency ETFs at their most basic are directional bets on the value of a currency.
However, the relationship between prices and GDP per head can be used to estimate the short-term fair value of a currency relative to others.
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The value of a currency may loosely reflect a country's economic fundamentals, but ultimately its value reflects the majority consensus about the government's ability to manage the economy and the nation.
Such adjustments are often sudden, leading to a very sharp fall in the value of a currency: this was highlighted in new research published recently by the Federal Reserve, America's central bank.
To fully understand the risks that face Bernanke, the Fed and the U.S. economy, I invite you to take a step back from everything we know about monetary policy and observe the critical role of trust in determining the value of a currency and the future path of inflation and interest rates.
The Bank of England, whose job is to maintain the value of a different sort of currency, has been doing rather well since it became fully independent in 1997.
In a dismantling of the eurozone, the losses on German credit extended to weaker eurozone economies would be huge, while German industry and employment would be hurt both by a rise in the value of a new German currency and by an inevitable recession in much of Europe.
Such expansionist monetary policies in and of themselves, in isolation regarding the fiscal policies, ultimately lead to a depreciation in the value of the currencies of emerging countries -- rather they lead to a depreciation in the value of the currency of developed countries, thus impairing growth outlooks in emerging countries.
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The official value of the local currency has plummeted by a factor of 16 in the past year, with inflation at over 780%.
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"Every airline is a country that gets to establish the value of their currency, and some provide a better rate of exchange than others, " said Mr. Sorensen, whose firm has been tracking airline seat availability for the past three years.
This is extremely dangerous for many reasons, but perhaps the most severe is that if the flow of natural resources ever comes to a sudden stop the value of the currency will crash.
Uncertainty about the value of the currency itself is a deadly dampener on these necessary activities.
Pushing down a currency's value may be easier, since a government can sell as much of its currency as it wants to print.
As the market shows, buyers of American bonds do not consider the currency a failed store of value.
Argentina, Latin America's fastest-growing economy last year, has the most rigid exchange-rate system of all, with a currency board that fixes by law the value of the peso at parity with the dollar, and thus limits the money supply to the level of foreign currency reserves.
In the absence of convertibility into specie, there must be a monetary rule to anchor the nominal value of paper currency.
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Because China does not disclose the composition of the basket, setting the value of the yuan in this way provides its currency managers with a high degree of flexibility.
The broader policy goal is to create a currency of stable value, free of human manipulation.
The uncertainty of a currency's value makes capital more expensive to employ.
Any bond investor will tell you that, assuming a currency of stable value such as is provided by a gold standard system, yields on high-quality debt will tend to decline in a recession.
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The best measure of a currency's true value is its price in gold, a standard measure of wealth for 4, 000 years.
Online services and exchanges dealing in Bitcoins have been hit by hack attacks that led to a drop in the value of the virtual currency.
Mr Zhou suggests that the dollar's reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound.
The gold standard, where a dollar is defined by a weight unit of gold, will enable people to use the same currency at a secured value.
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As a minor variant of this, especially if there has been a dramatic recent move in currency value, you could pick something closer to the 1-year trailing moving average.
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Hyperinflation involves price increases running out of control as a currency collapses in value.
And on January 30th, Thailand eased the exchange controls put in place last May in a vain effort to protect the value of its currency, the baht.
While there would be risks and unknowns involved with defining the value of the dollar in terms of gold, there would be enormous economic benefits to having a truly stable currency.
Among the countries hardest hit by the oil crisis is Indonesia, which has seen a 10% fall in the value of its currency, the rupiah, this year because of high oil prices.
Does history teach that a token-based currency works only if it is anchored to some unambiguous real store of value that a government cannot inflate away?
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