Reading 15 EOC 18 - Current account vs currency strength

CFA Level III Economics
#1

Hi,

EOC18 has country X and country Y. X is running a current account surplus(8%), while Y is running a current account deficit(-1%), and the question is to pick the one that should have a strengthening currency based on the current account situation.

I chose Y ( based on the explanation in the book where it says if investment> savings, ie. deficit, capital must flow from abroad to finance investment and to attract investors and keep capital necessary to compensate for savings deficit, domestic currency must increase in value and stay strong.

But the answer for this question is X. Can someone explain what I am missing?

#2

and did country y receive the capital flow it needed?..

#3

Here’s what I think:

X country has current account surplus -> export > import -> capital inflow > capital outflow --> demand for the currency in country x increases -> currency in country x appreciates