A rise in a country’s exchange rate enhances price competitiveness of its products, leading to an increase in its exports and a decrease in its imports, consequently often improving its GDP. For this reason, a rise in a country’s exchange rate has been traditionally seen to be positive for the nation’s economy. However, research findings indicate that a rising exchange rate may cause a decline in real purchasing power and an increase in corporate costs, which dampens a country’s consumption and investment.

 

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