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. Tequila Effect

    Informal name given to the impact of the 1994 Mexican economic ...
  2. Hard Currency

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

    A form of risk that arises from the change in price of one currency ...
  4. Soft Currency

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

    A collection of risks associated with investing in a foreign ...
  6. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  2. Mutual Funds & ETFs

    Protect Your Foreign Investments From Currency Risk

    Hedging against currency risk can add a level of safety to your offshore investments.
  3. Forex Education

    How To Trade Forex On News Releases

    When economic data comes out, it can have a marked impact on the currency market. Find out how to profit.
  4. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  5. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  6. Forex

    What Is Online Trading Academy?

    Online Trading Academy educates individuals about stocks, forex, futures and options as well as investment strategies based on the student’s trading style.
  7. Forex Education

    Understanding The Spread in Retail Currency Exchange Rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.
  8. Forex

    Main Factors That Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health, and can impact your returns.
  9. Forex Fundamentals

    How To Calculate An Exchange Rate

    Struggling to get a grasp on exchange rates? Here's what you need to know.
  10. Forex Fundamentals

    What Would Have To Happen For The Iraqi Dinar To Become A Stable Investment?

    What factors would cause price changes in the controversial Iraqi dinar?

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center