Is a strong economy generally accompanied by a strong currency?

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Readers Question: Is a strong economy generally accompanied by a strong currency?

In short, a strong economy is generally characterised by a strong currency. When the economy is doing well, and at a boom period of the economic cycle it implies higher interest rates to keep inflation low. These higher interest rates will attract hot money flows and more demand for the currency. A strong economy will also increase confidence in holding that currency. A strong economy may also imply that in the long-term the economy is becoming more productive and competitive leading to rising demand for exports and hence the currency.

However, there is no guarantee a strong economy will lead to an increase in the value of the

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This blog is written by Tejvan Pettinger. (born 1976)

He lives in Oxford where he works as an Economics teacher (A Level students) at Greenes College and formerly with Cherwell College, Oxford. Tejvan Pettinger studied PPE at Lady Margaret Hall, Oxford University, gaining a 2:1.

He contributes articles to the Economic Review and writes regularly on economics.

Between 2001 and 2006 he worked as examiner and Team Leader for Edexcel examinations.

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