The trade-weighted index (TWI) measures the Australian dollar against a basket of trading-partner currencies, weighted by share of Australia’s trade. It gives a broader read on the currency than any single pair, and is published by the Reserve Bank of Australia.
A single pair can mislead. AUD/USD might fall purely because the US dollar strengthened against everything, telling you about America rather than Australia. The TWI answers the broader question by averaging the Australian dollar’s value across the currencies of its major trading partners, with each weighted by its share of two-way trade.
The Reserve Bank of Australia calculates the index and reviews the weights as trade patterns shift, which over recent decades has meant a rising weight for Asian trading partners. Because of that construction, the TWI is the measure economists usually reach for when discussing whether the Australian dollar is strong or weak overall.
The index is a weighted geometric average, the method the Reserve Bank of Australia adopted in 1988. Since 2011 the basket has covered at least 90 per cent of Australia’s two-way merchandise and services trade. The weights are updated annually and the base period is May 1970 set to 100. A simplified basket shows what the geometric method does. Give three partners weights of 0.40, 0.35 and 0.25, and suppose the currency ends the period at 0.96, 1.00 and 1.02 times its starting value against them. Raise each of those three multipliers to the power of its weight, multiply the results together, and the index comes out 1.13 per cent lower. A plain weighted average of the same three moves gives 1.10 per cent. That 0.03 is the whole difference the method makes at this size of move.
Tradergy’s homepage board tracks the headline pairs that dominate the TWI basket, each struck from the same official sources.
Longer read: What a trade-weighted index measures, and what its weights reveal. One number for a currency against everyone it trades with, rebuilt every year from the previous year's trade. The construction is worth knowing, and so is what the changing weights say about who Australia trades with.
The practical companion to this definition is the Australian economy pages.
Related terms
Floating exchange rate · Currency appreciation · Currency pair · All terms
Primary authority: RBA exchange-rate statistics. Definition reviewed against the authority’s published material; this page is reference information, not advice.
Common questions
Why use the TWI instead of AUD/USD?
Because AUD/USD measures the Australian dollar against only one counterpart. The TWI averages its value across all major trading partners, so it distinguishes a genuine move in the Australian dollar from a move that is really about the US dollar.
Who sets the TWI weights?
The Reserve Bank of Australia constructs the index and updates the weights from trade data, so the basket reflects the countries Australia actually trades with. The method and current weights are published on the RBA’s website.
Can I convert money at the TWI?
No. The TWI is an index, not a tradeable rate; it has no currency on the other side. It exists to summarise the Australian dollar’s overall position, while actual conversions always happen in a specific pair at that pair’s own rate.