what does the nominal effective exchange rate neer tell you 
the neer only describes relative value it cannot definitively show whether a currency is strong or gaining strength in real terms it only describes whether a currency is weak or strong or weakening or strengthening compared to foreign currencies as with all exchange rates the neer can help identify which currencies store value more or less effectively exchange rates influence where international actors buy or sell goods neer is used in economic studies and for policy analysis on international trade it is also used by forex traders who engage in currency arbitrage the federal reserve calculates three different neer indices for the united states the broad index the advanced foreign economies afe and the emerging market economies eme 1every neer compares one individual currency against a basket of foreign currencies this basket is chosen based on the domestic country s most important trading partners as well as other major currencies the world s major currencies are the u s dollar the euro the british pound the japanese yen the australian dollar the swiss franc and the canadian dollar the value of foreign currencies in a basket are weighted according to the value of trade with the domestic country this could be export or import value the total value of exports and imports combined or some other measure the weights often relate to the assets and liabilities of different countries a higher neer coefficient above 1 means that the home country s currency is usually worth more than an imported currency and a lower coefficient below 1 means that the home currency is usually worth less than the imported currency there is no international standard for selecting a basket of currencies the organization for economic co operation and development oecd basket is different than the basket for the international monetary fund imf or the federal reserve or bank of japan however many different institutions rely on the international financial statistics ifs published by the imf 