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Valuation of currencies by comparing changes in comparative price levels against principal trading partners, either using consumer prices or unit labour costs

Visitor: So what do you think is a useful leading indicator?

RouteMaster: We use Real Effective Exchange Rates as the basis for fundamental analysis because they cause changes in the Balance of Payments. We have made our own calculations so as to give our subscribers a longer past record over the full range of currencies in our database, and do so on a consistent basis.

Incidentally we could show you several other types of investment strategy for the same country, where everything would be the same except the explanatory variable. This is part of our strategy to make complex analysis easily visualised by letting you see the same information in the same place as each new chart overlays the last one.

This chart shows that in 2008 the currency was vulnerable as the real effective exchange rate was at the top of its range over the last two decades, and the currency then fell sharply.