Relatively high value of the country’s currency

• What effect does currency appreciation have on a country's exports?

  It makes a country's exports more expensive relative to other nations
• Why do foreign buyers look for substitute products when a country's currency appreciates?

  Because the country's exports become more expensive
• What is the consequence of falling exports due to currency appreciation?

  Exports fall and the balance on the current account worsens
• How does currency appreciation affect imports?

  It makes imports cheaper
• What happens to the balance on the current account as imports rise due to currency appreciation?

  The balance on the current account worsens
• What might domestic consumers do when imports become cheaper due to currency appreciation?

  They may switch demand to foreign goods