How does a strong domestic currency affect exports?

When a country has a strong domestic currency, it means that its currency can buy more foreign currency. This strength tends to make goods produced in that country more expensive for foreign buyers since they have to exchange more of their own currency to buy the same quantity of goods. Consequently, the higher price can lead to a decrease in demand for those exports, as foreign consumers might look for cheaper alternatives from other countries with weaker currencies.

This relationship underscores the importance of currency value in international trade. A strong currency can make a nation's exports less competitive on the global market because consumers in other countries may find it more cost-effective to purchase similar goods from countries with weaker currencies. As a result, the overall volume of exports could decline, aligning with the idea that a stronger domestic currency can reduce demand for exports due to increased pricing.