Several factors can lead to currency depreciation, including:
Interest Rate Differentials: Differences in interest rates between countries can influence currency values. Higher interest rates attract foreign investors seeking better returns, strengthening the currency, while lower rates can lead to depreciation. Economic Performance: A country's economic health, indicated by GDP growth, employment rates, and other metrics, can affect its currency. Weak economic performance often leads to depreciation. Political Stability: Political instability or uncertainty can decrease investor confidence, resulting in capital flight and currency depreciation. Trade Imbalances: Persistent trade deficits, where a country imports more than it exports, can weaken a currency as demand for foreign currencies increases.