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Effective exchange rates

The purpose of effective exchange rates (EERs) is to provide meaningful and comparable measures of euro area countries' price and cost competitiveness, which depend not only on exchange rate movements but also on cost and price trends. EERs are geometrically weighted averages of the bilateral exchange rates of the given currency against the currencies of the euro area’s main trading partners. A positive change in the index denotes an appreciation of the EER of the given currency.

Nominal and real EER indices are currently computed against

  • a narrow group of 12 partner countries (EER-12), including Australia, Canada, Denmark, Hong Kong, Japan, Korea, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States
  • a group of 18 partner countries (EER-18), comprising the EER-12 plus Bulgaria, China, Czech Republic, Hungary, Poland and Romania;
  • a broad group of 41 partner countries (EER-41), encompassing the EER-18 plus Algeria, Argentina, Brazil, Chile, Colombia, Iceland, India, Indonesia, Israel, Malaysia, Mexico, Morocco, New Zealand, Peru, the Philippines, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, Ukraine and the United Arab Emirates.

The weights capture third-market effects and are based on imports and exports in manufactured goods and services with the euro area’s trading partners in the periods 1995-97, 1998-2000, 2001-03, 2004-06, 2007-09, 2010-12, 2013-15 and 2016-18, with the indices being chain-linked at the end of each three-year period. The weights used reflect the share of each partner country in the euro area’s trade in manufactured goods and services and account for competition in third markets.

The nominal effective exchange rates (NEERs) of a country or currency area aim to track changes in the value of that country's currency relative to the currencies of its principal trading partners.

The real effective exchange rates (REERs) aim to assess a country's (or currency area's) price or cost competitiveness relative to its principal competitors in international markets. They are the nominal effective exchange rates (NEERs) deflated by consumer price indices (CPIs), producer price indices (PPIs), GDP deflators and unit labour costs, both for the total economy (ULCT) and for the manufacturing sector (ULCM).

This section also contains nominal and real CPI-deflated EERs calculated by the European Commission.