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In: Business and Management

Submitted By azwirah
Words 2673
Pages 11
Name: Azwirah Yasin
Course: Econs 001
Title: The strength of a currency reflects its credibility. Or is it the other way round
Date: 11/21/2014

In this world of globalization, every country have the strong desire to move the nation forward and nurture their determination to sustain, develop and increase its power among other countries. It is indeed a known fact that we somehow have the richest country to the poorest country, each striving to attain credibility and integrity with countless ways done by their government, Congress, President and society. In short, money plays a massive role in the global economy.
Back when I was a teenager, I used to follow my uncle to his work as he owns a money changer and observe blindly how the currency in my country, Malaysia changes from day to day. I would be asking myself about the reason and the aftermath for the currency change. I was told that having a strong currency is what a country would strive in the end. A strong currency means a strong nation, thus a richer country. I began to question the rightness of the fact. Does the strength of the currency really reflect the credibility of its nation?
In general, according to an article on New York Times, it is said that ‘The supply of dollars to the foreign exchange market comes from Americans who want to buy goods, services or assets from abroad. The demand for dollars comes from foreigners who want to buy from the United States.’
As said, when there is a high demand, the dollar price increases and the supply of the dollar decreases. Meanwhile, when there is a low demand for dollars, the dollar price decreases and the supply increases.
A currency’s purchasing power is an indicator of the relative worth of currency. For an example given there is a nation called ABC. In May 2011, a nation’s currency of $1 ABC dollar could be equivalent to $2 US dollar and at the end

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