Purchasing Power vs Exchange Rates: Which determines the strength of a currency?

[Min George]

People always talk about the value of a currency. Exchange rates and purchasing power are two of the most talked about concepts when it comes to the strength of a currency.

Which one is more important to determine the strength of a currency of a country?

 

[Augusta]

I believe exchange rates are a direct measure of a currency's value, purchasing power just compare the relative value of currencies based on their ability to purchase things. So exchange rates reflect the market-driven price of one currency.

 

[Fidelia]

If you are looking to measure the value of a currency externally, it is the exchange rate that is important. But for internally, it is the purchasing power.

 

[eLdavis]

Exchange rates is often used to measure the strength of a particular currency against another currency.