Thursday, November 01, 2018

Currencies and Strong vs Weak terminology

Note to self:

1. When a currency is labelled as being strong, it means that you get more of the other currency against the currency (eg: US$ is stronger than the Indian Rupee, that would mean you get more rupees per US$).

2. When a currency is labelled as being weak, it means that you get fewer of the other currency against the currency (eg: US$ is weaker than the Indian rupee, that would mean you get fewer rupees per US$).

So in this chart, the US$ has become stronger when compared to the INR (because you getting more INR per $ (INR 63.2/$) today than 52 weeks ago (INR 74.4/$)).

image

When a currency is stronger than its counterpart, different people benefit: The weaker sides exporters are happier as their exports are cheaper and the stronger sides exporters are less happy as their exports




US Exporter

US Importer

US Currency Holder

Indian Exporter

Indian Importer

Indian Currency Holder

US$ stronger/INR weaker

Unhappy
Exports cost more

Happy
Imports cost less

Happy
More INR per $

Happy
Exports cost less

Unhappy
Imports cost less

Unhappy
Fewer $ per INR

US$ weaker/INR stronger

Happy
Exports cost less

Unhappy
Imports cost more

Unhappy
Fewer INR per $

Unhappy
Exports cost more

Happy
Imports cost less

Happy
More $ per INR

Examples

Caterpillar, Boeing, US Software companies

Walmart, World Market

American tourist to India

Indian Software companies, Indian manufacturers

International companies that manufacture their goods elsewhere and import to India, Indian resellers

Indian tourist/student travelling to US

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