DEFINITION of 'CFA Franc'
One of two African regional currencies backed by the French treasury, and pegged to the euro. CFA franc can refer to two either the Central African CFA franc or the West African CFA franc. Although they are separate currencies, the two are effectively interchangeable as they have the same monetary value against other currencies. However, they could theoretically have different values if France decides it.
"CFA" has had a few meanings over the years. Between 1945 and 1958 CFA stood for "colonies françaises d'Afrique", referring to former African colonies of France. Between 1958 and the independence of the nations using the CFA in the early 1960s stood for "communauté françaises d'Afrique" (French Community of Africa). Finally after independence and to this day it stands for "Communauté financière d'Afrique" (African Financial Community).
BREAKING DOWN 'CFA Franc'
The CFA franc was created in 1945 following the end of the Second World War. Previously, French colonies had their currencies pegged to the French franc, but the Bretton Woods Agreement ratified in 1945 had the French franc pegged to the dollar, devaluing the French Franc. By creating a new currency, the CFA Franc, France was able to avoid devaluating currencies in its colonies.