Answer:
strong domestic currency hampers exports
weaker domestic currency stimulates exports
Explanation:
The exchange rate has an effect on the trade surplus or deficit, which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper.
The value of exchange rates affect the demand for exports and imports. ... If the dollar is appreciated against Indian Rupee, the importer needs to pay more India currency against Import Bill. Ultimately it affect the cost of final product and final product become more costlier.
High interest rates help promote a strong currency, because foreign investors can get a higher return by investing in that country. However, the level of interest rates is relative. ... Ordinarily, this would weaken the U.S. dollar, except for the fact that interest rates behind other major world currencies are also low.
