Media Release Trade-weighted Index

The Bank has revised the weights used for currencies in the trade-weighted index (TWI) for the Australian dollar, to allow for changes in the country mix of Australia's trade during 1997/98. The revisions take effect from 1 October 1998.

The TWI is based on a sufficient number of currencies of our major trading partners to give at least 90 per cent coverage of Australia's two-way merchandise trade. Based on 1997/98 trade figures, this requires trade weights for 26 countries, with the Spanish peseta being added to the basket of currencies and the Saudi riyal being removed. The new weights are shown in the table. The method used to calculate the TWI was described in the Reserve Bank Bulletin for October 1988.

The new weights reflect an increase in the relative importance in Australia's trade of Europe and North America (whose combined weight has risen from 36 to 38 per cent). While Japan's weight also rose a little (18.0 to 18.8 per cent), there has been a fall in the combined weight of other countries in the Asian region (from 43 to 41 per cent).

Special One-Off Reweighting

A special one-off reweighting of the TWI will be carried out on 4 January 1999 to take account of the introduction of the euro. The weight of the euro will be determined by Australia's two-way trade with all eleven EMU participants. Details will be provided closer to the time of the reweighting.