In a floating exchange rate regime, if the demand for a

Solution

• Under a  floating exchange rate , the value of a currency is determined by market forces of demand and supply.
• An increase in demand for a country's  exports  means foreign importers need more of the domestic currency to pay for those goods.
• This increases the  demand for the domestic currency  in the foreign exchange market.
• With supply constant, increased demand leads to an  appreciation  (increase in value) of the domestic currency relative to other currencies.
• Devaluation  is a deliberate policy action in a fixed or managed regime, not an automatic market outcome.