A question on deficit trade balance?

Question

If US runs deficit trade balance with another country, does the other country's currency value appreciate or depreciate against US currency?

Answer 1

It depends. In general, all other things being equal, if the U S is importing more goods from a country than it is exporting to a country, one might expect the value of the dollar relative to the other country's currency to decline. In real life it seldom works that way. The reason is that the other country likes selling stuff to the U S. With the excess dollars that they receive they buy U S debt issues to support the price of the currency so that they will continue to have a favorable trade advantage. Eventually, the country in question will have such a large holding of U S debt issues that they will finally throw in the towel and begin to unload. When that happens the value of the dollar will adjust accordingly.

Answer 2

I would say the other country's currency value would depreciate
against the US dollar, for the simple reason, that US currency is
being used to purchase the other country's goods and/or services, and those US dollars are being converted into the currency of the other country at some point, and this might be to a better exchange rate from the other country.

Answer 3

eventually the currency of the country that consumes everything will devalue making it cheaper to finally produce there again. However, countries have many ways to manipulate markets in order to postpone these adjustments.

Answer 4

trade deficits are misleading, Rome had almost a 100% trade deficit with all other lands BECAUSE Rome was the top nation

Answer 5

If the other countries monetary unit is higher than the us dollar it declines and vise versa