Currency Basket

They say that you shouldn’t put all your eggs in one basket. But feel free to carry all your coins around in a basket if quarters start flying out of a winning slot machine.

Coins are heavy. They weight a lot. Baskets are strong.

Man, what a terrible advertisement for baskets.

In finance, currency baskets involve weight as well. But in this case, we're talking about allocating the amount of different currencies into one investment portfolio or vehicle.

For example, you might have a portfolio of currencies that consists of 55% euro, 25% yen, and 20% Canadian dollar. The purpose of different weights (in this allocation model) is to reduce your exposure to sharp fluctuations in the value of different types of money.

The U.S. dollar index (USDX) is the most popular and well-known currency basket, as it weighs against six currencies; British pound, Canadian dollar, euro, Japanese yen, Swedish krona, and Swiss franc.