A weak currency refers to a nation’s money that has seen its value decrease in comparison to other currencies. Weak currencies are often thought to be those of nations with poor economic fundamentals or systems of governance. A weak currency may also be encouraged by a country seeking to boost its exports in global markets.
In practice, currencies weaken and strengthen against each other for a variety of reasons, although economic fundamentals do play a primary role.
- There can be many contributing factors to a weak currency, but a nation’s economic fundamentals are usually the primary one.
- Export dependent nations may actively encourage a weak currency in order to boost their exports.
- Currency weakness (or strength) can be self-correcting in some cases.