Talk:Currency appreciation and depreciation

"Strong" and "weak" currencies

Does anyone feel able to add a section on the terms "strong" and "weak"?

Given that (as the article explains) there is no "correct" exchange rate for a currency, the terms are meaningless in a forex context. However if a loan is taken out in currency X and exchanged for currency Y (for use in a country that uses currency Y) then, when the loan falls due, the amount of currency Y needed to buy back the original amount of currency X may be significantly more (or less!) than originally borrowed. So what? Well at the very least, the lender of currency X will have to charge a risk premium to insure against the risk that the borrower will not be able to repay due to seriously adverse depreciation of currency Y. How big that premium must be is a function of the historic trend of both currencies, aka which one is "weak" and which one "strong".

Is there a less prolix way to write that? 𝕁𝕄𝔽 (talk) 11:34, 28 June 2024 (UTC)