Current account surplus cause domestic currency to appreciate? What can this be explained by savings-investment imbalances? Thanks. I thought rising currenc account deficit is good for domestic currency because that means capital account surplus, which is driven by capital inflow. And capital inflow drive up demand for domestic currency. On the other hand, current account surplus is good for the economy in the long run for obvious reasons. But that ties to relative economic strength theory. Am I missing something here.
Isnt this from L2?
I’ve seen this question in one of the EOC’s of Capital markets expectations session. As i remember comparing between countries with current account deficit and surplus the one with deficit will see its currency devaluate.