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What is a Parity? How is a Parity Calculated?

What is a Parity? How is a Parity Calculated?

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In its simplest terms, the parity refers to the ratio of country currencies. The interest rates of the country currencies and the economic conditions they are in can be counted as factors affecting the parities. For example, in terms of Turkey’s foreign trade balance, EURUSD (Euro Dollar parity) is a big part because of the fact that most of the exports are in Euros and most of the imports are in US dollars.

 

HOW CAN THE PARITY BE CALCULATED?

Euro: 3 TL Dollars: 2 TL and Euro Dollars 3/2 = 1.5. In this case, the Dollar will be 2/3 = 0.66.

 

An investor who bought EURUSD (long position) will have sold USD in exchange for the EUR bought; sale (Short Position) will make it sell Euro and receive US Dollars.

 

EURUSD parity (Euro / US Dollar), USDJPY (American Dollar / Yen), GBPUSD parity (Sterling / US Dollar) and AUDUSD (Australian Dollar / US Dollar) are among the top paratels that are traded on Forex markets. In addition to these, the USDTRY parity (US Dollar / Turkish Lira) and EURTRY (Euro / Turkish Lira) are also included in Turkey.

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