I have read that a current account deficit in theory should weaken a currency because a deficit means that the country is importing more goods and services than they are exporting which means that there is a lower demand for the currency. But I have also read that a current account deficit is financed by a surplus on the capital account.
Why should a current account deficit have an effect on the exchange rates when it is financed by an equally large surplus on the capital account?
Why should a current account deficit have an effect on the exchange rates when it is financed by an equally large surplus on the capital account?
If slaughterhouses had glass walls, everyone would be a vegetarian!