External value of a currency

The external value of a currency is the amount of foreign currency units that one receives for one unit of domestic currency, for example 1.18 USD for 1 EUR. If a currency appreciates, its external value increases. Then you acquire more foreign currency units for a domestic currency unit. On the other hand, if a currency is devalued, its external value falls. In this case, fewer foreign currency units are obtained for a domestic currency unit.

If the external value is given regardless of the different inflation rates at home and abroad, it is the so-called nominal external value. If, on the other hand, the different inflation rates at home and abroad are taken into account, it is what is known as the real external value. The European Central Bank (ECB) calculates a common external value of the euro against third countries.

See also "monetary policy"

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