How does currency appreciation typically affect a country's balance of payments?

When a country's currency appreciates, it means that its money has become stronger compared to other currencies. This can lead to a decrease in exports because goods from that country become more expensive for foreign buyers. At the same time, imports become cheaper, which might cause people in that country to buy more foreign products. As a result, the balance of payments, which tracks all financial transactions between a country and the rest of the world, can worsen because the value of imports may rise while exports fall. For example, if a country’s currency strengthens, its cars might cost more for buyers in other countries, leading to fewer sales abroad and a potential trade deficit.