Forex Dictionary

M2 Money Stock

M2 Money Stock

Measures the average amount of outstanding currency, excluding cash and deposits held by securities companies, tanshi companies, nonresident deposits, and cash held by the Japan post bank. A rising trend has a positive effect on the nation's currency although the relationship is not entirely reliable. The commonly held theory is that elevated currency levels spur growth and have an inflationary effect, leading to higher interest rates. However, some believe that an increased supply of money will trigger an equal drop in demand, leading to a lower currency valuation