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Building a Pre-Euro EURUSD Proxy with the ECU or European Currencies

Article Quant Q&A · Author: agathocles
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Summary

The document addresses how to extend EURUSD history to dates before the euro existed, for quantitative analysis. One suggested proxy is the European Currency Unit (ECU), a pre-euro basket currency. Its constituent weights can be used to construct a historical series, and the answer points to an available ECU series extending back to 1979.

A simpler alternative is to use the German mark as a stand-in, which one response considers adequate when daily open, high, low, and close detail is sufficient. For a more granular approximation, another answer proposes a weighted composite of European currencies, though it does not explain how those weights were derived.

These are proxy choices rather than a single definitive reconstruction of EURUSD. The document gives no validation results or detailed methodology for handling regime differences, exchange-rate conventions, or the euro’s transition, so researchers should assess proxy suitability for their analysis.

Key ideas

  • The ECU can serve as a proxy for the euro before its introduction.
  • ECU basket weights can be used to form a pre-euro historical series.
  • The German mark is a simpler proxy when coarse daily price data is sufficient.
  • A weighted mix of European currencies is another possible approximation, but its weights need justification.
  • Any proxy introduces limitations and should be evaluated for the intended analysis.

Tags

ForexStatisticsBacktesting
Full text
# Effective Euro-USD (EURUSD) Exchange Rate Prior to Euro's Existence


# Effective Euro-USD (EURUSD) Exchange Rate Prior to Euro's Existence












Motivation: I am running a quantitative analysis that requires long-term, exchange rate data.

Problem: Does anyone have methods for dealing with the EURUSD exchange rate prior to the Euro's existence? Is there some "natural" weighting scheme of the various European currencies prior to the Euro that I might use? Or, is there some proxy for the Euro prior to its debut?

Thanks in advance...

## Answer by ldnquant (score 14, accepted)

https://quant.stackexchange.com/a/1095

There was a proxy called the ECU.

You should be able to use the weights on the Wikipedia page to get a time series back to 1979. Alternatively, the St. Louis FRED also provides this time series.

## Answer by P. Dyess (score 1)

https://quant.stackexchange.com/a/7269

Most simply look to the German Mark as a proxy. It should suffice, assuming you don't require detail greater than what OHLC daily periodicity data offers.

A composite of Marks(75%), Francs(15%), Lira(5%) and Pesos(5%) would offer greater granularity if necessary.

## Answer by GHF (score 0)

https://quant.stackexchange.com/a/46011

see also this site for historical rates $/ECU https://fxtop.com/en/historical-exchange-rates.php

Note that this site contains a reasonable amount of advertisements

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.