Optimal common currency basket in East Asia

This article employs the currency invariant index due to Hovanov et al. (2004) to construct an optimal or stable common G-3 currency basket across different groups of countries in East Asia. Calculated optimal weights show a larger weight for the US dollar but a nonnegligible role for the Japanese yen. The volatility of the optimal common G-3 currency basket is several times smaller than that of a similarly proposed common G-3 currency basket in East Asia.