Did anyone question problem #18 in the CFA text for Reading 23 (p. 118 vol. 3)? The last observation for “current account surplus (deficit)” says that Canada would be the comparatively stronger measure. Shouldn’t a current account (deficit) be a strengthening factor for a currency because a currency would need to stay strong in order to attract and retain capital to finance the deficit? In time the currency would likely weaken but isn’t this question focusing on where you would see a stronger currency now? Am I just thinking about this wrong? There isn’t a CFA errata for this so wondering if anyone else was confused.
Normally the country who has the current account surplus is usually in a better position and has its currency strengthen. This leads to PPP theory.