<p>The European Currency Unit (ECU) was a basket of European currencies that existed from 1979 to 1998. It was not a physical currency but a unit of account used for accounting purposes within the European Union (EU).</p>

<h2>How It Works</h2>
<p>The ECU was a weighted average of the currencies of the EU member states. The weights were determined by the economic size of each country. It was used to facilitate trade and financial transactions within the EU.</p>
<p>To calculate the ECU, the following formula was used:</p>
<table>
<thead>
<tr>
<th>Currency</th>
<th>Weight</th>
</tr>
</thead>
<tbody>
<tr>
<td>DEM</td>
<td>0.32</td>
</tr>
<tr>
<td>FRF</td>
<td>0.21</td>
</tr>
<tr>
<td>ITL</td>
<td>0.17</td>
</tr>
<tr>
<td>GBP</td>
<td>0.14</td>
</tr>
<tr>
<td>NLG</td>
<td>0.10</td>
</tr>
<tr>
<td>BEF</td>
<td>0.08</td>
</tr>
<tr>
<td>LUF</td>
<td>0.06</td>
</tr>
<tr>
<td>IEP</td>
<td>0.04</td>
</tr>
<tr>
<td>DKK</td>
<td>0.03</td>
</tr>
<tr>
<td>ESP</td>
<td>0.02</td>
</tr>
</tbody>
</table>
<p>Where DEM, FRF, ITL, GBP, NLG, BEF, LUF, IEP, DKK, and ESP represent the currencies of Germany, France, Italy, the United Kingdom, the Netherlands, Belgium, Luxembourg, Ireland, Denmark, and Spain respectively.</p>

<h2>Why It Matters for Traders</h2>
<p>The ECU was significant for traders as it provided a stable unit of account for international transactions. It also served as a benchmark for pricing and settling trades in the EU.</p>
<p>Moreover, the ECU was used to set the exchange rate of the European Exchange Rate Mechanism (ERM), which was a system designed to maintain stable exchange rates between the currencies of EU member states.</p>

<h2>Example</h2>
<p>For instance, if a trader wanted to buy 100,000 ECU, they would need to buy:</p>
<ul>
<li>32,000 DEM</li>
<li>21,000 FRF</li>
<li>17,000 ITL</li>
<li>14,000 GBP</li>
<li>10,000 NLG</li>
<li>8,000 BEF</li>
<li>6,000 LUF</li>
<li>4,000 IEP</li>
<li>3,000 DKK</li>
<li>2,000 ESP</li>
</ul>

<h2>Key Takeaways</h2>
<ul>
<li>The ECU was a basket of European currencies used for accounting purposes within the EU.</li>
<li>It was a weighted average of the currencies of the EU member states.</li>
<li>The ECU was used to facilitate trade and financial transactions within the EU.</li>
<li>It was also used to set the exchange rate of the ERM.</li>
</ul>