Understanding a Weak Currency

Fundamentally weak currencies often share some common traits. This can include a high rate of inflation, chronic current account and budget deficits, and sluggish economic growth. Nations with weak currencies may also have much higher levels of imports compared to exports, resulting in more supply than demand for such currencies on international foreign exchange markets—if they are freely traded. While a temporary weak phase in a major currency provides a pricing advantage to its exporters, this advantage can be wiped out by other systematic issues.

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