Nominal Effective Exchange Rate - NEER

Currency trading is a very intimate affair. It might not involve candlelight and fine wine. But it does always happen in couples...or pairs, as it's known in the industry.

When you ask, "What's the dollar worth?" the question generally requires a one-on-one style response. You really should ask, "What's the dollar worth versus the euro?" or "What's the dollar worth versus the yen?"

The nominal effective exchange rate attempts to provide a more general answer to the value question. Instead of forcing you to focus on a single trading pair (dollar vs. euro, dollar vs. yen, etc.), it calculates a value using a basket of currencies.

The NEER gives an unadjusted weighted average value of a currency's value against a group of other world currencies. The goal is to provide a more general look at how a particular currency is doing on the forex market, rather than looking at the situation pair by pair.