I don’t see how the two relate to each other. Can some1 enlighten me on this issue?
Import increase–>demand for foreign currency increase–>foreign currency appreciation–>depreciation of US $
But isn’t the low value of dollar making American goods cheaper and hence helping american exports. This will reduce the deficit if not totally wipe it… Am I correct in my understanding?
Import increase–>demand for foreign currency increase–>foreign currency appreciation–>depreciation of US $–>Xport increase–>current account surplus