Trade agreements have a big effect on exchange rates between countries. Let’s break down some important points:
Trade Balance: When a trade agreement is good, it can lead to more exports. For example, the trade gap between the United States and China shrank from 310 billion in 2019 thanks to trade talks.
Currency Demand: More exports mean more people want to buy things from that country. If Japan sells more products, more people will want to get Japanese yen, which can make its value go up.
Inflation Rates: Trade agreements can help keep prices stable, which also affects exchange rates. For instance, lower tariffs can make prices drop and help keep inflation in check.
In the end, trade agreements create a connection between economies that affects how currencies are valued.
Trade agreements have a big effect on exchange rates between countries. Let’s break down some important points:
Trade Balance: When a trade agreement is good, it can lead to more exports. For example, the trade gap between the United States and China shrank from 310 billion in 2019 thanks to trade talks.
Currency Demand: More exports mean more people want to buy things from that country. If Japan sells more products, more people will want to get Japanese yen, which can make its value go up.
Inflation Rates: Trade agreements can help keep prices stable, which also affects exchange rates. For instance, lower tariffs can make prices drop and help keep inflation in check.
In the end, trade agreements create a connection between economies that affects how currencies are valued.