How to Measure Dollar Strength

by Mar 9, 2022Forex Currency Pairs

Dollar strength is measured by the currency strength meter by comparing the price between major currency pairs and showing the dollar strength as a bar chart or a line chart.

You See Currency Strength Meter is Showing Dollar Strength Rising

Currency strength meter live

What you can see in the image above is that U.S. dollar strength is at the top. That means the U.S. dollar is at the moment the strongest currency compared to others on the image.

The currency strength meter has taken the current price and compared it to the previous period. The result shows that the U.S. dollar strength has increased compared to previous price.

And when the U.S. dollar is checked against other major currencies the results are positive for USD.

Currency Pair Price of U.S. Dollar Against Any Other Currency is Rising in Value

In this case I will show you how the market looks when the U.S. dollar is rising in value against other currencies.

US dollar strength against other currencies

What you can see here is that the U.S. dollar is strong against other 6 currencies.

The chart shows you on the left side U.S. dollar as a quote currency. And the price of the Forex currency pairs where the U.S. dollar is a quote currency will fall down if the U.S. dollar is strong.

This is like this because for example EURUSD pairs will decline in value when the U.S. dollar is strong. That means EUR will lose in its value and will become weaker. So, the price of EUR against the dollar will decline.

On the right side you have the U.S. dollar as a base currency. And the price of a currency pair where the U.S. dollar is a base currency will rise in value if the U.S. dollar is stronger.

The price will rise because when you have a USDCAD pair that means USD will become stronger and CAD will lose its value and will decline.

You See GDP and Interest Rate of U.S.A. is Rising in Value

Here I will use an example when the GDP of the U.S. is rising so you can see how the news about the GDP affects the U.S. dollar. And that is when the GDP rises the U.S. dollar strength will increase.

US dollar strength and GDP

The chart above shows you how the price of EURUSD currency pair is rising and declining in value. That means EUR is losing strength and U.S: dollar is gaining in strength.

Because of positive GDP news for USD the dollar strength rises.

U.S. Dollar Strength and Interest Rates Impact

In this case you can see when interest rates of U.S. dollar declines which means U.S. dollar is losing the strength. The rate has declined from 1.75 to 1.25.

The chart shows you that EUR is gaining strength against U.S. dollar and the price of EURUSD currency pair is rising.

Lower interest rates for U.S. dollar makes the dollar less attractive to investors so they move from U.S. dollar in more attractive currencies. Because investors will make less money with lower interest rates.

With money going outside of U.S.A. the dollar becomes weak. And that weaknes is visible as the EURUSD pair price is rising.

US dollar interest rates

What is the Dollar Strength Today?

Dollar strength today is available on the currency strength meter website which has a live value of a dollar. The strength of a dollar is refreshed every day so you can be sure to have the last information about the dollar strength.

On the currency strength meter website you can find the strength of other major currency pairs which are refreshed every day.

If you want you can calculate dollar strength on your own. To do that you need to find the strength of a dollar against other major currencies. Those are EUR, GBP, AUD, NZD, CAD, CHF, JPY.

When you combine all major pairs with the U.S. dollar you should use the last 50 daily candles and check the price of each currency pair today and the price 50 days in the past.

When you have those two prices you calculate the difference between them in percentage. You will get positive or negative value. Maybe +1.2% or -3.2%, as an example.

Have in mind that USD should be base currency so you get correct values. And to do that on an EURUSD pair or any other where USD is on the second place, just switch the places and the price will be equal to  USD/EUR = 1/EURUSD. Here EURUSD value will be the price on the chart you see.

And when you calculate USD price change with all major pairs you need to find the average strength of the dollar.

If you need more help about calculating the currency strength I suggest you visit this page.

What Determines the Value of the Dollar?

Value of a dollar is determined by the economic health of the U.S.A. and the health of the U.S.A. is determined with the GDP, inflation, interest rates, employment and risk.

If you dive into each of these factors you would get this:

  1. GDP defines how the health of the U.S. economy is doing. Does the country is prospering or having problems growing and providing their citizens the resources they need
  2. Inflation defines are the prices of goods affordable for the citizens to survive or the price is too high and citizens have trouble to get the food and energy
  3. Interest rates define whether the dollar is attractive to investors or not. Not attractive dollar will lose its value against other currencies because interest rates are too small and investors cannot make money by investing in it
  4. employment defines how the citizens work, do they work or they do not work. Employed citizen is a happy citizen who can provide food on the table
  5. risk defines whether the citizen in the country feels safe. Unsafe environment for any citizen is a key to leave that country which at the end will have impact on the U.S. economic health and eventually to dollar strength

When you use all these factors into calculation you will get the value of a dollar strengthening or losing strength against other currencies.

The currency that is attractive, strong, the economy healthy, citizens happy, investors happy to invest will make the currency highly valuable.

Why is the U.S. Dollar Getting Stronger?

When U.S. economy factors like GDP, interest rates, employment increase the U.S. dollar will become stronger against other currencies.

Second case that can happen is when you combine the U.S. dollar against another currency that is losing its value, and that means GDP, interest rates are declining then the U.S. dollar strength will rise.

If you look at the chart showing the U.S. dollar against other currencies you will see how the price of a currency pair is doing over time. It can happen that the price has spikes in price which means something happened at that moment.

News with economic data has an impact on the dollar strength so you need to pay attention when news will be published.

If the news is positive for the U.S. dollar then the U.S. dollar is getting stronger. And if something bad happens in Europe then the U.S. dollar will become a stronger currency than Euro.

If something bad happens in Europe the investors will look for safe heaven currency for their money. And that means U.S. dollar can be that currency which will make the currency stronger.

What Country is the US Dollar Worth Most?

U.S. dollar worth the most in these countries:

  1. Argentina
  2. Switzerland
  3. India
  4. Brasil
  5. Morocco
  6. Serbia
  7. Eurozone
  8. Russia
  9. Chile
  10. Sri Lanka
  11. South Africa
  12. Australia
  13. Croatia
  14. Mexico
  15. Sweden

The data were pulled from the barchart website on 20.12.2021.

The calculation was done by comparing a price of 1L of milk in each country and then populating the table with the cost in U.S. dollars.

US dollar strength worth

What is the Weakest Currency Against the Dollar?

The weakest currency against the dollar is Argentinian Peso where 1 dollar is equal to 102,4198 Argentinian Peso.

This is visible in the table above where you can see exchange rates between the U.S. dollar and other currencies.

For $0,01 in Argentina you can buy 1L of milk which is the lowest price compared to other currencies.

The U.S. dollar is so strong against Argentine Peso that you can buy a lot of goods and products for a small amount of money.

For example when you search a little bit over Google what are the price of the houses in Argentina you will find:

The cost per square foot for the ready-to-move-into houses ranges from $65 to $93.

And if you take into account small prices for living, buying groceries, Argentina Peso is the weakest currency against the dollar.

How Do You Tell if a Currency is Stronger or Weaker?

Currency strength meter shows you graphic visualization how strong currency is against other currencies.

You can tell the currency is strong if the currency has high value on the currency strength meter and other currencies are weak.

Second, you can tell the currency is strong if the price of one currency rises in value against other currencies.

US dollar strength against other currencies

The Chart above shows you U.S. dollar strength against other six currencies. The chart shows a currency pair with the U.S. dollar in it.

When you look into the charts you can tell the U.S. dollar is stronger than other currencies because the price of currency pairs is rising or falling down.

In cases where the U.S. dollar, USD, is on the second place like GBPUSD, EURUSD and AUDUSD, the price is falling which means the USD dollars is stronger and GBP, EUR and AUD are weaker.

In the second case where USD is on the first place like USDCHF, USDCAD and USDJPY, the price of a currency pair is rising which means the USD is stronger than other currencies.

How Do You Know Which Currency is Stronger?

You know which currency is stronger by checking currency strength meter visualization where each currency strength is compared to other currencies.

If the bar or line on the chart shows the highest value then you know which currency is strong. If it shows low values then you know which currency is weaker.

Currency strength meter live

Does Strong Currency Mean Strong Economy?

Strong currency means a strong economy because the economy defines whether the currency is strong or weak.

If the GDP, interest rates, inflation, employment and other macroeconomic factors are bad then the currency will not have back up in any way and it will not be strong.

If you have all macroeconomic factors good then the economy of the nation will be strong and consequently the currency will be strong.

What Country Has the Strongest Currency?

Strongest currency against dollar

Kuwait has the strongest currency against the U.S. dollar where 1 Kuwaiti Dinar is equal to $3.30.

Second country is Great Britain which is the second strongest currency against the U.S. dollar where 1 British Pound is equal to $1,32.

Euro is the third strongest currency against the dollar where 1 Euro is equal to $1,13.

Fourth strongest currency against the dollar is Swiss Franc where 1 Franc is equal to $1,08.

These values are based on the currency rates on 20.12.2021.

What Does a Weak U.S. Dollar Mean?

Weak dollar means you can buy less goods for one dollar compared to when the dollar is strong.

For example if you go to Kuwait and bring U.S. dollars with you then you will need to pay $1,69 to buy 1L of milk.

But if you go to Argentina you would need to pay $0.01 for 1L of milk.

Weak dollar means you can buy less goods for $1.

Is a Strong Dollar Better Than a Weak Dollar?

Now when you know what it means to have a weak dollar now it is time to see if it is better to have a strong dollar than a weak dollar.

Strong dollar means you will be able to buy more goods for $1 dollar.

In the case of Argentina where 1L of milk is $0.01 means you can buy 100l of milk for $1.

This is great. Your buying power is high and you can buy many other goods because everything is cheap.

But, strong dollars for Argentina citizens and companies is not good.

If a company from Argentina wants to buy a car from the U.S. and a U.S. company wants to sell their car to an Argentine company, that will be hard.

Because Argentina does not have so much money to buy U.S. cars. The Argentinian company’s buying power with Argentina Peso is so low that they will need to spend a lot of money to buy a car.

When you see this from that angle you can see that a strong dollar is not better than a weak dollar.

For you as a consumer who is buying goods from weaker countries is great because you can get more goods for less dollars.

And also for U.S. companies that want to buy material outside of the U.S. is great to have a strong dollar.But for companies in the U.S. it is not good to have a strong dollar when they want to sell their goods to them.

There is a fine line between strong dollar and weak dollar so every party in the goods exchange is satisfied.

And for that there is the Forex market and central banks that control the price of currencies.

“Disclosure: Some of the links in this post are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. This does not cost you anything extra on the usual cost of the product, and may sometimes cost less as I have some affiliate discounts in place I can offer you”

Frano Grgić

Frano Grgić

A Forex trader since 2009. I like to share my knowledge and I like to analyze the markets. My goal is to have a website which will be the first choice for traders and beginners. Market analysis is featured by Forex Factory next to large publications like DailyFX, Bloomberg... GetKnowTrading is becoming recognized among traders as a website with simple and effective market analysis.

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