Introduction To MT4 VPS
The connection between the exchange rate and the adjustment of the balance of payments, in the simplest case is that exchange rates are determined by supply and demand, in which a country starts being in balance and then undergoes a disturbance in its balance of payments.
For example, a rise in interest rates to curb inflation and increase foreign demand for assets of this country. There would be an excess demand for this currency to the old exchange rate as shown by MT4 VPS. In this type, the country tend to have a commercial and financial surplus, since it would increase the amount of money to come into the country.
This is where the exchange rate plays the role of balancer. With increasing demand for the currency, the situation causes an appreciation of this and a depreciation of the others. The exchange rate variation continues until the accounts of the balance of payments back into equilibrium.