It’s common to hear talk of one currency being “stronger” or “weaker” than another. This comparison helps determine how much of each currency is required to make purchases. A currency that’s stronger than another means it requires less of that currency to purchase the same good or service. The opposite is true for weaker currencies.
The graph above compares two currencies with the US dollar (USD) over the past 3 years: the Swiss franc (CHF) and the Canadian dollar (CAD). As we can see, the USD/CHF exchange rate is almost always below 1, while the USD/CAD rate is always above 1 (always above 1.2, in fact). This means, in general, that a Swiss franc is stronger than a US dollar and a Canadian dollar is weaker than a US dollar.
Example: If a cup of coffee in the US costs 3 USD, it would require only 2.61 CHF but 4.02 CAD to purchase that cup of coffee.
Most USD currency exchange rates in FRED appear with the USD as the “base currency” (or numerator in the ratio) and the foreign currency is the “quote currency” (or denominator). This formula answers the following question: For each USD, how much of the foreign currency would it take to achieve the same value? However, there are a few exceptions where the USD is the quote currency―most notably, when comparing it with the British pound sterling (GBP) and the euro (EUR).