How can market sentiment and speculation lead to the appreciation of a currency?

Market sentiment refers to the overall attitude of investors and traders toward a particular currency. When people feel positive about a currency due to economic news or events, they are more likely to buy it, increasing its demand. For example, if a country releases strong job growth numbers, investors may believe its economy is doing well, leading them to buy that country's currency. This increased demand can cause the currency to appreciate, or increase in value, compared to others. Speculation also plays a role, as traders might buy a currency expecting it to rise further, which can create a self-fulfilling cycle of appreciation.