Currency Basket

Currency Basket Meaning:
In foreign exchange terminology, a currency basket consists of set amounts of two or more currencies. The average exchange rates of the currencies weighted by their amounts in the basket, determines the value of such baskets.

Currency baskets, like the European Currency Unit (ECU) and the Asian currency unit, have been used within trading blocs to reduce the risk of currency fluctuations. They can also be used by corporations or fund managers to aggregate and hedge their overall exposure to fluctuations in the currencies of other countries relative to the currency of their own country.