Weak Currency

DEFINITION of 'Weak Currency'

A currency with value that has depreciated significantly over time against other currencies. The long-term outlook for a weak currency is that it will continue to lose value due to fundamental weaknesses in the nation that issues this currency.

BREAKING DOWN 'Weak Currency'

Weak currency nations generally have poor economic fundamentals, which may include a high rate of inflation, chronic current account and budget deficits and sluggish economic growth. Nations with weak currencies usually have much higher levels of imports, compared with their exports, resulting in more supply than demand for such currencies on international foreign exchange markets if they are freely-traded currencies. While a temporarily weak phase in a major currency provides a pricing advantage to its exporters, such a benefit seldom accrues to exporters in weak currency nations, since other factors such as high input costs and bureaucratic red tape may offset this advantage.

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