Currency Union

AAA

DEFINITION of 'Currency Union'

When two or more groups (usually countries) share a common currency or decide to peg their exchange rates in order to keep the value of their currency at a certain level. One of the main goals of forming a currency union is to synchronize and manage each country's monetary policy.
Also referred to as a "monetary union".

INVESTOPEDIA EXPLAINS 'Currency Union'

A group of countries (or regions) using a common currency. For example, in 1979, eight European countries created the European Monetary System (EMS). This system consisted of mutually fixed exchange rates between these countries. In 2002, 12 European countries agreed to a common monetary policy, thus forming the European Monetary Union. One reason why countries form these systems is to lower the transaction costs of cross-border trade.

RELATED TERMS
  1. European Union - EU

    A group of European countries that participates in the world ...
  2. European Economic and Monetary ...

    The successor to the European Monetary System (EMS), the combination ...
  3. Central Bank

    The entity responsible for overseeing the monetary system for ...
  4. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European ...
  6. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
Related Articles
  1. Options & Futures

    Exploring European Options

    The ability to exercise only on the expiration date is what sets these options apart.
  2. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  3. Forex Education

    How To Use A European Open Forex Strategy

    Forex traders need to be aware of both price movements and the time of day. Learn FX strategies that incorporate these factors to maximize profits.
  4. Forex Education

    How International Tax Rates Impact Your Investments

    International investors need to be aware of the staggering correlation between tax rates and economic performance.
  5. Forex Education

    Drastic Currency Changes: What's The Cause?

    Currency fluctuations often defy logic. Learn the trends and factors that result in these movements.
  6. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  7. Forex Education

    Dual And Multiple Exchange Rates 101

    Why would a country choose to implement dual or multiple exchange rates? It's risky, but it can work.
  8. Forex Education

    Are Downside Tusuki Gap patterns important when trading forex pairs?

    Find out why forex traders use candlestick charting for currency pairs, and learn how the Downside Tasuki Gap pattern can be spotted for short-term gains.
  9. Chart Advisor

    4 Currency ETFs On The Move

    The Bank of the Japan rocked the yen last week, but it isn't the only currency ETF to watch. Big moves are occurring throughout the forex market.
  10. Forex Education

    Understanding The Spread in Retail Currency Exchange Rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.

You May Also Like

Hot Definitions
  1. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  2. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  3. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  4. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  5. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  6. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
Trading Center