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Basically, if the demand for a currency is high, then the value (strength) of that currency will rise with the demand. As far as how the strength of a currency is related to its exchange rates. Strong currency = high demand for that currency → higher exchange rates.
Currency strength is calculated from the U.S. Dollar Index, which is used as a reference for other currency indexes. The basic idea behind indicators is “to buy strong currency and to sell weak currency”.
As far as I understand it, Currency strength is just another way of saying purchasing power or value of a currency. It's determined by supply and demand just like everything else in the market. Google says (just now) that $1 is worth.
What exactly does it mean for a currency to be strong or weak? A currency is strong if it is becoming more valuable relative to another country's currency. Conversely, a currency is considered weak if it is becoming less valuable versus another country's currency.
A currency is classified as strong when it is worth more than another country's currency in other words, if the American dollar was worth half a pound, the pound would be considerably stronger than the dollar. That means that the American dollar would be considerably weaker than the pound.
The value of money is determined by the demand for it, just like the value of goods and services. When the demand for Treasury's is high, the value of the U.S. dollar rises. The third way is through foreign exchange reserves. That is the amount of dollars held by foreign governments.
When one country's currency is worth more than that of another, it does not necessarily indicate a stronger economy. Supply, demand, inflation, and other economic factors will cause changes to a currency's relative price. It is these changes that ultimately determine the strength of a currency.
A strong currency makes a country's exports more expensive, hurting that nation's trade competitiveness. On the other hand, a weak currency makes imports more expensive, boosting domestic inflation.
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