If you consider one currency A getting weaker against another currency B, that may mean currency A remains the same fundamentally, but B is getting stronger for some other fundamental reason. However, if you see a currency getting weaker against a basket of stable currencies and commodities, that can happen due to the result of these factors, often combined
- The government is running deficit and funding it by money printing and borrowing.
- The central bank is lowering the reserve requirement and pumping in money into the economy to stimulate transactions.
- The country is moving from a position of trade surplus towards trade deficit.
- The country C pegged its currency to another country U which is inflating its currency. If the central bank of C is unable or unwilling to move out of the peg, then inflation will spread like a contagion.
