Strong Currency Is Not Always Good And Weak Currency Is Not Always Bad

There are days when the global market is happy. Other days, it is sad and listless because of the US-China trade war and Brexit. One of the most obvious places where you notice the macro effects is the foreign Currency Exchange market. Shockwaves of any economic event is immediately felt in the global market in the form of exchange rates.

In New Zealand, they compare their dollar to the US dollar benchmark or in some cases to the pound sterling. Every time that Trump tweets something controversial or if the domestic GDP becomes disappointing, the New Zealand dollar either loses or gains value in relation to the US dollar.

Most people do not worry about this stuff; it only matters when they go on a quick trip to Japan. Those involved in import and export business knows how to navigate the currency market to their advantage. In the foreign currency market, the words weak and strong are commonly used. Strong is not always good while weak is not always bad.

For example, if the yen is weak, the New Zealand dollar would be strong which is not actually a bad idea.  If you are an exporter of wool to Japan, it is very likely for the sales to drop. If you are exporting beef which is a more competitive market, those with weaker currency like Argentina will enjoy more market advantage.

Generally, the factors that are driving the foreign exchange market are similar to those of the stock market. Improved unemployment and higher GDP in other countries are always good news but it can drive up foreign currencies and cause the New Zealand dollar to weaken. Besides that, more investors will buy the currency and drive up the price. If only 2 parties are involved in Forex, everything would be a breeze but there are 180 currencies with their unique places in the global market.

Even if you are not involved in import and export business, it is worth keeping up with strong and weak currencies. You may require Currency Exchange in the future if you purchase real estate in another country or send a child to a foreign school.

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