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what does it mean when foreign currency becomes stronger (or weaker) than the US dollar? What does it imply...?
...about the country?
2 Answers
- 1 decade agoFavorite Answer
If a foreign currency becomes stronger against the U.S. dollar, this means that country can now buy more dollars per one unit of their currency. U.S. exports have increased recently because other countries can now by U.S. prouducts for cheaper than before because of the weakening dollar.
Inflation is certainly a factor to why currencies may strengthen or weaken, but it is not the only one. One of the reasons the U.S. dollar has decreased in value is simply because we import more than we export. In other words, there are more dollars going to other countries than coming in. This means, on a world market, that the supply of dollars has increased. The demand for dollars has either remained constant or possibly decreased. This will result in the value of the dollar to decrease. If we were exporting more than we were importing the opposite would be happening, and the U.S. dollar would appreciate. For instance, there is a lot of upwards pressure on China's currency, though their exchange rate is set by the Chinese government. If the Chinese did not fix its exchange rate you would see their currency strengthening rapidly.
- Anonymous1 decade ago
it means just what it says that are dollar is weaker compared to there currency its caused by inflation( printing to much money ) and we have been doing that alot in the past 50 years so much that are dollar is not worth what it was back in the 50s or 30s....