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Measuring the value of currencies: Exchange rates and inflation
FRB of St. Louis
2023.09.20
The FRED graph above shows the exchange rate of two currencies with the US dollar: the Swiss franc and the Colombian peso. We chose these two for their obvious contrasting history.

The Swiss franc is considered to be among the strongest currencies-meaning that it tends to appreciate with respect to many other currencies.
The Colombian peso is the opposite, with continuing depreciation with respect to strong currencies. (One peculiar benefit of using this currency is that it was never rebased-i.e., never had a few zeroes removed from its high face value. This numeric consistency avoids potential issues with displaying the peso’s exchange rate across various definitions of the currency.)

The graph shows that, over the longer run, the Swiss franc has become stronger than the dollar while the Colombian peso has gotten significantly weaker than the dollar. There are considerable variations at shorter horizons, which can be driven by many factors related to the expectations about the currencies’ respective economies. (This recent FRED Blog post covers this topic.) But back to the long-run changes