A parity is a pair of currencies in which a country’s currency is valued against the currency of the other country. According to their prevalence in global markets, major and minor (exotic) parities are examined in two groups. The parallels traded most in global markets are called major. Another reason for the major denomination of these currencies is that country economies are robust and dynamic.
There are 7 major currencies that are traded on financial markets. These are Euro, US Dollar, Japanese Yen, British Sterling, Swiss Franc, Canadian Dollar, Australian Dollar. Minor currencies are currencies with lower transaction volumes, preferred by local investors.
The most preferred minor currencies are New Zealand Dollar, South African Randi, Singapore Dollar. Parity pairs consisting of one major currency and one minor currency are also called minor parity.
On the Forex market, every transaction on the parity occurs when a foreign currency is sold and other foreign currency is bought. According to this price, it is necessary to understand how much the counter currency should be paid to get one from the first currency. If the EURUSD is priced at 1.1090, EUR1.1090 will have to be paid to get 1 EURO. In the Forex market, investors aim to earn from price fluctuations of currency pairs by buying or selling other currencies in exchange for a foreign currency. The expectation of investors who want to buy the euro and make a profit increases the value of parity, but this situation is shaped by the multiplicity of supply and demand.
How is the parity calculated? We will clarify this question with the help of a sample;
EURUSD is calculated as: 3,2440 / 2,9220 = 1,1101.
There are many factors that affect the price of the parity. These are economic data, decisions of the Central Bank, political developments and geopolitical risks, which have a significant effect on the price of the currency. The increase in interest rates ensures that the growth figures announced on the anticipation or the value of the industrial currency are appreciated; Low employment, rising foreign trade deficits in emerging countries, or rising inflation lead to the devaluation of the money. The uncertainties in the political structure of the country and the loss of political confidence will cause the currency to lose value.
If we explain by giving an example; The US Dow Jones (US30) index is composed of the weighted average of the top 30 industrial sectors. Numbers written near the country indexes indicate how many shares are in the index. There are also sectoral indices within the stock market indexes. .
If we look at world indices; The NASDAQ Index (USTEC) is the American Index, which includes the top 100 non-financial technology companies listed on the Nasdaq stock exchange. Another difference of this index from other indices is that it includes companies that are not American corporations. Organizations must be listed with a volume of 200,000 shares in the Nasdaq stock market for at least two years to be included in the indexes, but not in any business case.
When trading in the world stock market indexes, you should follow all the information about the world economy, the economic and political developments of the country where the index belongs, the state of the stocks in the stock market indices and the indices.
In particular, it should be noted that the decisions of the Federal Reserve. Federal Reserve (FED) and the European Central Bank (ECB) are very influential on the world stock market index values.