What happens with the currency during a trade deficit?
The trade deficit, it tends to devalue the currency. There are many variables, the exchange rate and the balance of payments, such as growth, interest rates, inflation and Government policy, but mostly negative trade deficit vs determine the wind.
This is through a country's trade deficit, buying more goods and services abroad, which was sold abroad. Foreign companies with your currency in your pocket. We focus on United States in recent years, the dollar in trade deficits. Are used for managing Treasury securities or other assets in the United States, especially during the time to buy financial stability and economic growth.
If the import is always higher than that of exports, deteriorating trade deficit results in dollars more in the pipeline. Off on currency weakness. As the dollar weakens, imports are expensive, exports, which some cheaper moderate trade. What are the currency continues to weaken, so that more dollar assets more attractive to foreigners.
Persistent deficits stored in United States from the mid-80 's, but people expect important weak dollar don't translate. Mainly because of the position of the dollar as the world reserve currency to the dollar even more because it is the world that Central Bank reserves in world trade has an important role to create the request.
We see in the trade deficit, trade deficit in 2008 was halved. There are two main reasons, first is the crisis and then in the United States, the Fed's monetary policy is less high growth rates and liquidity in the system, the impact on the dollar. The low purchasing power of foreign products more expensive, so the correction of the trade deficit.
Namely because the lead partner President Bush trump card against the traffic, one of the reasons, for example, to the Mexico national protectionism. In the year 2015, the trade deficit with Mexico was .000 $49,200 of products and services. For this reason, Trump, a policy apply tariffs on Mexican products, which makes them less competitive.
Major economies, its own currency, the eurozone's room, the output of Japan and the United Kingdom is in a similar, which could lead to a trade deficit. Countries without confidence in the investment sector are more likely to see their currencies in trade deficit.
