Trading in the forex market is similar to trading in the stock market in a way that you need to use a benchmark currency to compare currencies. With the exchange rates of US dollars and other major currencies today, there are more than a few types of currencies available. The pair of currencies you should use to price your goods and services are the USD and the foreign currency.
There are also many pairs of DPI (dollars per English) and AUD (British pound) to choose from. The AUDUSD exchange rate is the popular one.
A currency pair means the currency with which you are comparing prices. You could use DPI or the Dukascopy index as a benchmark for the AUDUSD exchange rate. There are many other pairs for instance, the USDCAD, the NZDUSD, the USDCHF, and the GBPUSD.
In the case of the DPI, it is basically a measure of the actual money supply. This value is greater when the country’s economy is more prosperous. It is called DPI because, under the United Nations, it has been seen that the economies of nations ought to be measured according to the DPI. The value of the DPI can differ greatly from one economy to another.
On the other hand, the AUDUSD currency is based on a measurement of the total quantity of money that is created by the commercial banks. In fact, in the currency market, there are two different types of measures. One is called the book value and the other is the trade value. You will find that these terms do not mean the same thing when you use them.
The book value measures the worth of the money that is spent or borrowed by commercial banks. This is measured in American dollars per BCD. When you pay ina bank with a credit card, the bank will multiply the amount you have borrowed with a number that is the national currency of that country.
The trade value is based on the exchange rate of the commercial banks. This will be the actual exchange rate between the euro and the dollar. If you sell a euro for dollars at your local branch of a bank, you will find that the difference between what you had bought and what you sold is your “trade value.”
The problem with using the book value for comparing rates is that it is usually used to make simple comparisons among currencies that have less to do with the actual financial situation of countries. In a sense, it is a very old concept. While it is somewhat accurate, it is hardly a good choice for making big decisions about the USDUSD and the DPI.
The DPI is actually a bit more useful. As mentioned, the official United Nations formula is used to measure the sizes of economies, and the DPI of course gives a clear picture of the total money supply.
To do some good comparison of the AUDUSD and the DPI, it is essential to look at both measures in relation to the domestic economy. The DPI will allow you to see the monetary flows into and out of a country’s economy. It is true that there are not many people in the DPI, but they are the ones who create it.
If there is a lot of money in the economy, there will be lots of borrowing by people, companies, and individuals. But when there is not much money in the economy, a decline in borrowing will be reflected in a decline in the DPI.
This is important in understanding the situation of international markets today. The AUDUSD has the largest exchange rate in the world but it is dwarfed by the trade values and the book values of many countries. Do not put your trust in the DPI because it can only give you a partial picture of what is happening in a country’s economy.