Currency Appreciation

Currency Appreciation



The world value of the currency in one country is considered in another. And this value is determined against the demand and supply experienced. Thus, exchange rate changes are followed by many investors, especially States. The components that make up the value of money are so sensitive and effective that even the smallest part of the components creates a butterfly effect in the value of money. These components vary depending on the economic policies of the countries, the bilateral trade of the countries and the risks that the countries carry. And these components also divide interest rates into many points on the basis of current deficit and foreign trade.

If the interest rates of a country rise, the currency of that country is usually positively affected by exchange rate changes. In other words, that currency is valued against other currencies. When interest rates rise, capital owners invest in the country to benefit from interest rates and have a foreign currency entry to the country. This also makes a positive contribution to the value of money.

Another important factor in the appreciation of money is foreign trade. The increase in export rates against imports shows that there is a demand for the country's goods in the world. This causes the currency to increase in the country and thus the local currency gains value against the currency. In this case, in the long run, the current account deficit will close rapidly.

As a result, the appreciation of a currency depends on the use of that currency in foreign trade without exchange rate play, the value of investment and the economic and political stability of the country. The components mentioned above interact with each other. Changes in any one affect others negatively.