Current Account Surplus vs. Saving Surplus currency, country

DoubleDip

A country's currency will appreciate or depreciate if it has Current Account Surplus / Deficit ?
Saving Surplus / Deficit ? I am confused !

Can anyone help ?

mar350

There are some relevant materials in Reading 23.

Any confirmation or further comment ?

ll11

Current Account Surplus = More exports than imports

Savings account surplus generally leads to current account surplus. Since more money to invest and consume.

Roflnadal

AMA Wrote:
-------------------------------------------------------
> idreesz Wrote:
> --------------------------------------------------
> -----
> > Current Account Surplus = More exports than
> > imports
> >
> > Savings account surplus generally leads to
> current
> > account surplus. Since more money to invest and
> > consume.
>
> It seems that Current Account Surplus will lead to
> appreciation of a country's currency while Savings
> Surplus will lead to depreciation.
>
> Correct me if I am wrong.

I need to know why you say Savings surplus will lead to depreciation.

As I mentioned above, high savings rate make sure you have more money to invest and consume without having to rely on loans (deposits) from other countries.

NakedPuts2011

This is why I raised the questions here since I am aware of that both positive and negative sayings seem to be justified and I am confused.

It is said that Savings Surplus will lead to depreciation because there will be cash outflow (to chase higher return outside of the country) and cash outflow beeds to sell domestic currency and buy foreign country, so domestic currency will depreciate.

On the other hand, can you confirm that Current Account Surplus will lead to appreciation of a country's currency ? This seems to be discrepant to what is said to Savings Surplus and that's why I am confused.

Anyone else can help ?

pennyless

Hmmm....I get your point.

I agree with bpdulog. Current Account Surplus will lead to appreciation.

mik82

my understanding:
savings surplus = savings higher than investments, this surplus goes abroad and is converted to foreign ccy, domestic ccy is sold - depreciates

savings deficit = investments higher than savings, needs to be financed from abroad and domestic ccy is bought and appreciates

but the actual FX rate effect will depend on the actual flows and if they are hedged or not ...

liangfeng

So, our conclusions are :

Current Account Surplus : lead to appreciation of a country's currency
Savings Surplus : lead to depreciation of a country's currency