notes said income growth rate higher will get a depreciated currency. I understand this that higher income growth means more import,so more need for foreign currency and this lead to lower currency. but what is the correlation between GDP growth and currency movement?
It honestly depends. Under expansionary monetary policy, currency depreciates but GDP increases alongwith inflation. Under restrictive monetary policy, currency appreciates, but GDP decreases alongwith inflation. Under expansionary fiscal policy, currency appreciates and GDP and inflation also increase. (lower taxes, higher borrowing) Under restrictive fiscal policy, currency depreciates and GDP and inflation also decrease. (higher taxes, less borrowing)