How is the Strength of a Currency Determined?

by Dec 26, 2021currency strength0 comments

Strength of a currency is determined by the economic health of the country. The health of the country is determined with the GDP, inflation, interest rates, employment and risk.

If you dive into each of these factors you would get this:

  1. GDP defines how the health of the country economy is doing. Does the country is prospering or having problems growing and providing their citizens the resources they need
  2. Inflation defines are the prices of goods affordable for the citizens to survive or the price is too high and citizens have trouble to get the food and energy
  3. Interest rates define whether the currency is attractive to investors or not. Not attractive currency will lose its value against other currencies because interest rates are too small and investors cannot make money by investing in it
  4. employment defines how the citizens work, do they work or they do not work. Employed citizen is a happy citizen who can provide food on the table
  5. risk defines whether the citizen in the country feels safe. Unsafe environment for any citizen is a key to leave that country which at the end will have impact on the country health and eventually to currency strength

When you use all these factors into calculation you will get the value of a currency strengthening or losing strength against other currencies.

The currency that is attractive, strong, the economy healthy, citizens happy, investors happy to invest will make the currency highly valuable.

Currency Strength Determined With Meter

When you use all the above factors and combine them you will get the strenght of a currency. That strength can be shown on the chart with value which will tell you is the currency strong or weak and the tool for that is currency strength meter.

The chart that can be bar chart or line chart is showing you strength against other currencies. The strength is determined by comparing strength of each currency against other currencies.

If you plan to trade currencies against other currencies based on the currency strength then you should avoid mistakes when using currency strength meter and that is to trade strong currency against strong currency.

Pin It on Pinterest

Share This