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What is the difference between weak dollar and strong dollar?

ForexZig.com October 12, 2012
weak dollar strong dollar

Weak or strong?

Weak dollar and strong dollar are terms used in the Forex market exchange in order to describe the relative value and strength of the U.S. dollar against some other foreign currencies.

We have a strong dollar when the U.S. dollar reaches a level against other currency, which is similar to extremely high exchange rates for the other currency relevant to the dollar. See the following example – the exchange rate between the U.S.A. and Canada is fluctuating between 0.6 CADUSD and 1.1 CADUSD, and if the current exchange rate is at 0.7 CADUSD, the U.S. dollar would be regarded as weak and the Canadian dollar – as strong. However, a strong American dollar could be defined as one that is trading at a historically high level, like 1.1 CADUSD.

Analogically, you may have heard about strengthening and weakening. These two terms have the same context but relate to the changes in the U.S. over a particular period of time. A strengthening dollar is called when the value of the American dollar has increased in comparison to another foreign currency. In other words, now the U.S. dollar buys more of the other currency than it previously did. A weakening U.S. dollar is the opposite of the situation above – the U.S. dollar has decreased in value comparring to the other currency. Thus the U.S dollar buys less of the other currency.

All these terms could be used relating to any other foreign currency.

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