What exactly does it mean if a countries currency is "weak" ? And how does the price of gold tie into this?

Question

How can it be sygnificant that a counties currency isn't worth as much as another countries?

What does this really mean, and how does a country get their currency to be stronger?

Answer 1

If a country has a weak currency it means it takes more of their money to buy things from countries w/ strong currency. For example, if the US dollar is "weak" and the Euro is "strong" then it takes more dollars to buy a given amount of goods and services that are valued in Euros. Generally, if an economy is doing poorly and if the world financial markets begin to lose faith in that economy then the value of its currency will decline or become "weaker". As for the connection with the price of gold, when a currency weakens, people will trade that currency for things with some intrinsic value like gold or oil etc. to prevent their wealth from decreasing. This is one reason why the prices of gold and oil are high right now, people have traded their weakening US dollars for these commodities.

As for what a country can do to strengthen its currency, it's immensely complicated but it boils down to pretty simple things like not spending too much borrowed money, creating a favorable environment for business, making sure you have educated workers etc..

Answer 2

When currency is not backed by gold or silver . Its value is backed by faith only . As the faith in the stability of the currency wains it's value drops . This is fiat money . When you have this type money they can print as much paper fiat money . Now the amount of paper money increases to points where it's value drops . An it can drop to a worthless value as it is doing now . Gold always has a value and it will increase in the amount of this fiat money to buy it as the fiat money looses faith value .

Answer 3

weak currency means that the country's currency is depreciated against the other currencies...

if a country has a weak currency it is at advantage if it is an exporting country... this way the exports of the country will increase as other countries would find it cheaper to buy from us.