Strong currency weakens itself?
Hi everyone,
I had a question about currency values and googling/searching the forum wasn't able to give me the answer I was looking for so I decided to turn to you guys! Apologies in advance if this question sounds foolish, but would a strong currency ultimately weaken itself?
So lets say country X has favourable measures for foreign investors, like high interest rates, so the demand for that currency would become higher. With a higher demand, currency value would go up, so when it comes time for country X to export goods, other countries would likely not want to purchase their goods because it would be more expensive for them. Ultimately since other countries don't want to export their goods wouldn't the currency value go down?
Any clarifications would be greatly appreciated!
Depends on what's driving the strong currency. For the case of 'safe yen' swiss/yen, a strong currency in turbulent or uncertain markets may further strengthen it due to its desirability.
Lets say for simplicity sake that high interest rates are the only thing driving the demand for the currency (there are a plethora of other factors but I'm simplifying it just to understand this), wouldn't the currency also suffer from this driver because of other countries not wanting to purchase country X's goods due to the high value of currency?
Let me know if I'm missing out on something....
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