The Value of Currencies
Currencies can be defined as universal units of measurement that are considered legal tender, with the same value no matter where they were issued or when they were issued. In other words, a currency is a unit of money in any shape or form when in actual use or circulation, particularly circulating coins and banknotes. In the United States, the dollars were the only legal tender, and they were always issued from circulation in gold. However, since the gold standard was discontinued in the 1930s, there has been a decline in the dollar’s purchasing power relative to other currencies. The Japanese yen, for example, has had a surge in popularity as a safe investment opportunity because it is the greenback of the Japanese economy. In addition, the Swiss franc (CHF), Australia dollar, and the Euro have also experienced strong increases in their purchasing powers against the dollar in recent times.
Currencies are often thought of as a way of exchanging one currency for another, but that is not their only use. In addition to providing money for trade among countries, the values of different currencies often fluctuate based on political and economic developments within those nations. For example, the value of the euro has declined significantly against the dollar in recent years because many European countries have experienced financial difficulties. If the European debt problems continue to persist, the euro may become a very weak global currency and traders will gravitate to the Swiss franc as an equal exchange rate.
Historically, there have been several major world events that have had a major impact on the value of currencies. For example, the devaluation of the dollar in the early 1970’s led to the introduction of the gold standard in the United States, which was instrumental in stabilizing the American economy during the early stages of the Vietnam War. The Asian Financial Crisis, which began in late 1997, was the catalyst for a large retuning of the international interest rates and the currencies of all nations were affected. This has, to some extent, reduced the volatility of the foreign exchange rates. However, the strong U.S. dollar continues to be a major obstacle to the continued growth of the Swiss economy.