: How are some currencies stronger than others even when their exchange value is low?

Question

For example, 1 Kuwaiti dinar = 3.26 USD = 266 INR, but the USD is strongest of them all

In: 9

Answer 1

Exchange rates are effected by the supply and demand on the foreign exchange markets. If you want to buy something in the US you need to pay in dollars. If you want to buy something in the EU you need Euro. If the US supplies less dollars in the foreign exchange market it appreciates and vice versa.

Having a weak currency is not a bad thing though as some countries do not have an absolute advantage in trade – having a greater production output. If your currency is weak it is cheaper for other countries to import your goods.