How does an increase in speculative capital inflows affect the currency value of a country, considering the implications of monetary policy?

When a country experiences an increase in speculative capital inflows, it means that more investors are putting their money into that country, often to take advantage of potential high returns. This influx of money increases the demand for the country's currency because investors need to convert their foreign currency into the local currency to make their investments. As demand for the currency rises, its value typically increases relative to other currencies. However, this can also lead to challenges for monetary policy, as a stronger currency may hurt exports by making them more expensive for foreign buyers. For example, if a lot of investors pour money into a country to invest in its stock market, the local currency may strengthen, which could make it harder for local companies to sell their products abroad.