system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: What decides the strength of a currency?
gpt
"Strength" and "value" of a currency are two different things, often conflated.  I'll try to pull them apart.


The strength of a currency has more to do with the direction in which the currency's value is going.  If it's going up, and doesn't tend to fluctuate very much, then it's said to be strong.  The exchange rate between the currency and, say, the US dollar could be 1000 to 1, but the currency is strong if last week it was 1050 to 1.


A currency will generally be strong based on three factors.  


The first is whether or not the demand for goods from the native country is large.  If US cars start suddenly becoming popular, then demand for the US dollars to buy them will go up - making the US dollar stronger.

The second is whether or not other currencies have become weaker.  If the world is in a recession, but China alone seems to be unaffected, then the yuan will be seen as relatively strong.


The third is a little less straightforward - it's whether or not the currency is "trusty."  People who buy the currency want to know that it will retain its value, that the government in charge of printing that currency will not devalue it, or that the economy is not on the verge of collapsing.  The US dollar is one of the "trustiest" currencies in the world, whereas countries that print too much money lower the value of their funds, basically flooding the currency market.


"Strength" of a currency is basically still just an exercise in supply and demand.