Currency Trading Wikipedia
Why does a trade deficit lead to the depreciation of a country’s currency?
On wikipedia it says: “A nation with a trade deficit will experience reduction in its foreign exchange reserves which ultimately lowers (depreciates) the value of its currency.” Why does a reduction in the foreign exchange reserves lower the value of currency?
take it like this,
when no trade happens the foreign exchange reserves come down
an in order for the country to maintain its foreign exchange reserves, the country reduces the value of its currency (this makes more foreign country’s invest in the country)
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