Why Sterling pound is more valuable than USD?

Question

since i know the UK economy is smaller than the US economy than why is it its money are much higher than the world largest economy

Answer 1

The fact that the sterling trades at a higher rate than the US$ does not mean it is worth more. The price of a currency is related to a number of functions such as;

1- Federal reserve interest rate
2- International supply & demand for a certain currency
3- The stability of the economy of the currency
4- Government intervention in the exchange rate - example U.S has always tried to depreciate the U.S$ to allow for a better balance of payments and lower the trade deficit with other countries such as Japan, Europe & China

As a final note, the fact that some countries use different monetary valuation policies such as Japan, the Yen is trading at around 115 against the US$, Does that mean the U.S economy is 115 times stronger? No, it is a subjective way of looking at the economy and its power.

Answer 2

There's no single reason why because there are a number of factors that go into how the market values a particular country's money.

Things like how stable the government is, GDP growth rates, level of inflation are all taken into consideration. But if you think about it, the US right now is involved in the War on Terror and Iraq. With the majority of troops in Iraq being American, would you think that the markets would be happy? War is not something they particularily like because it's unpredictable, and markets don't like uncertainty.

And US relations with the rest of the world aren't the greatest right now. The currency markets take these into consideration as well.

The size of your country's economy is a factor, but it's all relative. The US has one of the largest, if not the largest economy. But does that automatically mean you're performing the best? No. China and India's economies are growing faster and more than the US.

Answer 3

same question why is the Yen so weak, the chinese have most of the trade in the world yet there econmy seems weak but it is not really coz everything in china is cheap.The english economy dates far back, It is the english you went to America, The American's had to get independence from the english, so England never had a depression like America.