After World War II, why is sterling pound still the highest currency in the world?

Question

I heard that the US wanted the sterling pound to be the highest. Is that true. Please explain.

Answer 1

I doubt it.

The relative value of a currency is based on an extremely complicated set of factors.

At one time, the pound sterling was more 'valuable' inasmuch as it would usually take more than 1 unit of any other currency to purchase 1 pound sterling. This designation, however, is completely irrelevant as to the level of "strength" a currency has. Strong currency only means it takes more of your units of currency to buy my units of currency than the other way around.

Consider that in areas with "weak" currencies it may take 5,000 pesetas to make $1, but those 5,000 pesetas may buy more in that country than $1 buys in the U.S.

This is called Purchasing Power Parity, and what it basically means is that, if the currency market is truly open and perfectly equilibriates, then the exchange rate between dollars and pounds sterling should be such that a good purchased in the U.S. and a good purchased in Britain costs the same when you convert the currency.

Answer 2

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