What might contribute to a currency appreciating?

A currency appreciates when its value increases relative to other currencies, and this can be influenced by several fundamental factors. The correct choice highlights strong economic performance, high interest rates, and political stability as key contributors.

Strong economic performance typically indicates that a country's economy is growing, which can create a higher demand for its currency as investors seek to invest in that economy. When a country is performing well economically, it attracts foreign investment, and that influx of capital increases demand for its currency, leading to appreciation.

High interest rates also play a significant role in currency appreciation. When a country's interest rates are higher compared to other countries, it offers better returns on investments denominated in that currency. This can attract foreign capital seeking those higher yields, subsequently increasing demand for the currency, which adds to its value.

Political stability is equally important because it instills confidence among investors. A stable political environment reduces the risk associated with investment in that country, making it more appealing for foreign investors. When investors feel secure in a country’s political situation, they are more likely to invest, which boosts demand for the currency, leading to its appreciation.

In contrast, the other options present scenarios like weak economic performance, high inflation, and political instability, which would generally deter investment and lead