The value of currency is determined through the laws of supply and demand. What I don’t understand is why can’t a country with high imports rate preserve the value of its currency if it also has a high export rate and there’s a lot of demand on its currency as well?
In: Economics
Import and exports are traded goods. So a country with reasonably balanced and large international trade volumes (plus stable governance) can maintain a rather stable currency. The demand and supply of foreign reserves will be somewhat balanced for that country.
Of course the goods exported must actually be produced and sold – ie there must be actual realized demand for the exports. Theoretical or potential exports are of little use.
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