Discussion about this post

User's avatar
Neil Winward's avatar

Great post. I think of currencies like this:

- Major Currencies (Highways and Cities): Major currencies like the USD, EUR, JPY, and GBP are akin to highways connecting major cities. These currencies are widely traded, highly liquid, and the backbone of global trade and finance. As highways facilitate efficient and large-scale transportation between key hubs, major currencies provide stability and reliability in international markets.

- Minor Currencies (Secondary Roads and Towns): Minor or regional currencies like the NZD or SEK are like well-maintained secondary roads connecting smaller towns. They are still crucial for trade within specific regions but lack major currencies' global reach and liquidity.

Exotic Currencies (Village Roads): Exotic currencies like the Iranian rial or Zimbabwean dollar resemble local village roads—narrow, less traveled, and often unreliable. They are less liquid, more volatile, and typically used only within their domestic economies or for niche purposes.

- Currency Strength Indicators (Traffic Flow): Just as traffic flow on highways and roads indicates their usability and importance, currency strength indicators reflect the economic activity and market confidence in a currency. A "jammed highway" might represent a strong currency under stress (e.g., high demand), while an empty village road could signify a weak or underutilized currency.

Your guide is like Waze!

Expand full comment
Anant's avatar

Great read. Took me like 90 mins to read. Is there any good resource for Cross Currency basis? Would like to learn more about that.

Expand full comment
14 more comments...

No posts