Hi, The following para is from the BRIC section. I don’t understand the link between low per capita income and weak currency. As far as I know, an economy with low per capita income means the economy is not using its human/capital resources to its full potential. I think I am missing the link between the currency and the economy’s capacity. 'When countries have low per capital income levels, their currencies tend to be weak and below levels predicted by purchasing power parity (PPP). As the developing countries mature and income rises their currencies appreciate and converge towards the value predicted by PPP. ’ Thanks, MG.
The per capita income increases when the overall economy is doing well - there’s growth in the economy. As a result, demand for the currency goes up. This results in the currency appreciating. For example, as the Japanese economy picked up, the per capita income went up and the currency appreciated.