Under Curriculum volume 1, Reading 4, section 7.2.3 “Portfolio Balance, Portfolio Composition, and Sustainability Issues”, it was mentioned that, strong economic growth in a country tends to correspond to an increasing share of that country’s currency in the global market portfolio. Investors need to be induced to increase their allocations to that country and currency, which weakens the currency and increases the risk premiums.
Why would the currency be weakened and risk premiums increased when the investors are increasingly getting the currency of this country? Shouldn’t it be appreciation? I am so confused. 