HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

How To Identify Strong And Weak Currencies?


Are you an ambitious, venture trader with a strong interest in foreign exchange trading? Read this article to get a better understanding of strong and weak currency trading principles.

How can you identify when a currency is strong or weak?


Let’s start by talking about the most important facts. When there is a decrease in the value of a country’s currency, always compared to other currencies, then that currency can be seen as a weak currency. It’s also important to point out that a weak currency is often thought to be found in countries with poor economic foundatıons, but with fairly strong export activity.

What’s the correlation between private companies, the government, and their impact on international markets?

“It is vital to look at the economic foundation of specific countries to determine what type of currency characteristics are required. For example, high exporting countries such as China prefer to have weak currencies as this is what companies within the economy require to operate efficiently. Whereas, high importing countries benefit from a strong currency as this results in cheaper goods for companies, for example, the UK. If the currency is priced appropriately in accordance with economic requirements, it can support  sustainable economic growth.” Michalis Efthymiou, eXcentral’s Market Analyst said.

Several factors can contribute to a weak currency but at this moment it’s good to note that a weak currency could also have benefits. That’s why several countries may prefer to maintain their currency weaker. These, as a simple reference,  may give you further food for thought.

Well, returning to the essence of things, substantially weak currencies often share some common characteristics such as a high inflation rate, deficit budgets and a minimum growth rate. Now, what defines a strong currency? The increase in the value of a country’s currency against other currencies. 

A strong currency can have advantages but also disadvantages. Cheaper trips abroad and less costly imports are some of the benefits of a strong currency, while export activity can be considered a disadvantage due to higher purchasing value of products – a strong currency makes the goods of a country more expensive, with a negative long-term impact, which could essentially shift consumers to cheaper markets.

Michalis advises investors to listen to central bank comments on financial requirements

“Without a doubt, strong currencies have both advantages and disadvantages, this is why central banks concentrate largely on keeping the currency exchange rate at a price which best benefits the economy. This is why it is important for traders to listen to comments made by the central banks regarding economic requirements, interest rates and inflation, as these are all linked to the exchange rate. Traders also have the ability to view and analyse currency indexes such as the USDX or EURX to obtain a stronger understanding of the currency’s current strength or weakness”.

Reading the above, it’s understandable that strong and weak currencies have multi-trading potential. To create integrated strategies, you need to go deeper and that’s exactly what this article aims at, to help you start analysing better.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.65% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

#source


RELATED

Everything You Need to Know About Margin Trading

Margin trading is a popular method used by traders all over the world. It can offer attractive opportunities, but as with any form of trading there are no guarantees and the level of risk must be taken...

Why trade shares?

Why trade shares, continue to read and learn more. Trading shares involves buying and selling company shares listed on a stock exchange. Traders choose to trade shares...

What is Copy Trading and how does it work?

Are you interested in trading the financial markets but feel like you don’t have the time to learn new strategies? Maybe you already trade but can't find a way...

Technical and Fundamental analysis

Technical analysis complements fundamental analysis by focusing more on numbers, patterns, and statistics, instead of the intrinsic value of an asset...

Money Management: One of the Keys to Success

Online trading of currencies (Forex), cryptocurrencies, and CFD deals with other financial assets (stocks, gold, oil, etc.) offer unique opportunities...

What are penny stocks?

Penny stocks, also known as “junk” stocks, are securities of small or problem-riddled companies that usually trade at a price of less than $5. They are not frequently-traded stocks...

What is Risk Management in Forex?

A trade may be closed profitably or at a loss. Trading, as a whole, may become profitable or lead to losses. Risk management in Forex is about reducing the loss factors.

Altcoins, Bitcoin, DeFi, NFTs: Various Types of Cryptocurrency Explained

According to the current running total on cryptocurrency price aggregator CoinMarketCap, there's over 9,000 types of cryptocurrency in the crypto market today...

Common Trading Mistakes Every Trader Should Avoid

Trading in financial markets can be both exhilarating and profitable, but it's essential to navigate this world with caution and discipline. Many traders, especially beginners, often fall into common pitfalls...

What is forex scalping? Understanding the ins and outs

In the forex industry and investment world, scalping refers to trading currencies based on a set of real-time analysis. The idea and purpose behind this, is to make profit through buying...

Choosing a trading instrument: how to trade stocks and CFDs on stocks

We continue our series of articles on choosing a trading instrument. This time you will learn what CFDs on stocks are, how to trade them and how such...

An Introduction To Forex News Trading

Political and economic news is a powerful source of fluctuation in global financial markets. Even rumors of events such as falling central bank interest rates, lawsuits by governments...

Unlocking the Power of Fibonacci Retracement: A Beginner's Guide

Trading with Fibonacci retracement might sound daunting, but it's a remarkably valuable tool once you grasp its fundamentals. Let's delve into the key concepts and step-by-step guidance...

3 Not-so-hot Tips for New Traders From

A new wave of investors, or collectively known as “Generation Investors”, has spurred into the stock market during the pandemic. Research conducted by the FINRA Investor...

How long did it take to become a profitable trader?

Each person has different skills, different life experiences and obviously, some are more fortunate than others. The same can be said about traders. Things may differ for any trader when...

What is Algorithmic Trading?

Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows an algorithm (a defined set of instructions) to place a trade...

Investing vs Trading

Investing vs trading are two different approaches to making money in the financial markets. While both seek to make a return through market participation, they differ in terms of their profit goals and execution of financial strategies...

Intraday Trading: The Complete Guide

The advent of online trading available to anyone with a smartphone or tablet has opened up financial markets like never before. Modern technology, 24-hour news, and minimum...

How to Stop Exiting Trades too Early

One of the biggest struggles traders face daily is the temptation to exit trades too early. There are numerous reasons one might opt to close a trade too early, ranging...

InvestLite: Definition of margin trading

As margin is a widely used tool in trading, we need to understand margin definition, buying stock on margin, and how it applies in practice. This article is going to answer...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.