Currency Update for Steel Trading Nations - July 11th 2014

Explanation of data sources: The broad index is published by the Federal Reserve on both a daily and monthly basis. It is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. The index weights, which change over time, are derived from U.S. export shares and from U.S. and foreign import shares. The data are noon buying rates in New York for cable transfers payable in the listed currencies.

At SMU we use the historical exchange rates published in the Oanda Forex trading platform to track the currency value of the US $ against that of sixteen steel trading nations. Oanda operates within the guidelines of six major regulatory authorities around the world and provides access to over 70 currency pairs. Approximately $4 trillion US $ are traded every day on foreign exchange markets. The Broad Index value of the US $ has been gradually strengthening for almost two years, (Figure 1), and is up by 3.4 percent since the end of 2012. Since mid-2011, the dollar has strengthened by 7.7 percent. This favors imports to the US and depresses exports. The currencies of the steel trading nations do not necessarily follow the broad index and in fact as a generalization can sometimes move in the opposite direction.