Weak Currency

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Country Risk

    A collection of risks associated with investing in a foreign ...
  2. Hard Currency

    A currency, usually from a highly industrialized country, that ...
  3. Soft Currency

    A currency with a value that fluctuates as a result of the country's ...
  4. Currency Risk

    A form of risk that arises from the change in price of one currency ...
  5. Tequila Effect

    Informal name given to the impact of the 1994 Mexican economic ...
  6. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
Related Articles
  1. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. Protect Your Foreign Investments From ...
    Mutual Funds & ETFs

    Protect Your Foreign Investments From ...

  3. How To Trade Forex On News Releases
    Forex Education

    How To Trade Forex On News Releases

  4. 6 Factors That Influence Exchange Rates
    Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center