Financial Knowledge

Strong Dollar, Weak Dollar:Foreign Exchange Rates and the U.S. Economy - Consumer Information, Federal Reserve Bank of Chicago: "Factors Contributing to a Strong Currency

Higher interest rates in home country than abroad
Lower rates of inflation
A domestic trade surplus relative to other countries
A large, consistent government deficit crowding out domestic borrowing
Political or military unrest in other countries
A strong domestic financial market
Strong domestic economy/weaker foreign economies
No record of default on government debt
Sound monetary policy aimed at price stability.
Factors Contributing to a Weak Currency

Lower interest rates in home country than abroad
Higher rates of inflation
A domestic trade deficit relative to other countries
A consistent government surplus
Relative political/military stability in other countries
A collapsing domestic financial market
Weak domestic economy/stronger foreign economies
Frequent or recent default on government debt
Monetary policy that frequently changes objectives. "