Looking independently at each of the economic observations below, indicate the country where an analyst would expect to see a strengthening currency for each observation：
Country X Country Y
Current account surplus (deficit): 8% -1%
Country X, because a current account surplus means the country’s exports are higher than its imports, thus relatively higher quantity of foreign vs local currency than in country Y.
Note that this conclusion is in an stand-alone basis. I mean, assuming others variables stay constant like capital flows, interest rates, government spending / investment, etc.
But on curriculum 3 page 101:
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My understanding is if there is current account surplus, exchange rate falls, while there is current account deficit, exchange rate rise.
Current account deficit would cause financial account surplus. Government might issue foreign debt and net foreign currency inflow into the country might cause an immediate effect of domestic currency appreciation because government might exchange foreign currency into domestic one to settle various liabilities inside the country (e.g. pensions payout, other social transfers or whatever) od simply encourage an investment cycle. Over the longer term such situation might be unsustainable which would led to domestic currency depreciation. Thus, fundamentally speaking I agree with Harogath. Same happened in my village. Sigh.