What Determines Currency Strength?

A currency's strength reflects its value relative to others and its stability. Key drivers include:

• Economic Growth: Consistent growth attracts foreign investment, boosting demand for the currency.
• Low & Stable Inflation: Preserves purchasing power; central banks target price stability.
• Higher Interest Rates: Offer better returns, drawing capital inflows.
• Favourable Trade Balance: Exports exceeding imports increase foreign demand for the currency.
• Geopolitical Stability: Political and economic certainty encourages investor confidence.

Currency strength is relative and fluctuates with global events, market sentiment, and policy shifts.