Why is a country's savings rate directly related to the value of its currency?

Question

Why is a country's savings rate directly related to the value of its currency?

Answer 1

What you have to understand is that a nation's currency reflects the overall economic health of that country. So when people are able to save more, it's taken as a sign they're doing well and not suffering.

In addition, banks will take that money you put into your account and use it to make loans. This is a basic concept that's covered in money and banking classes. Banks lend to one another and create money by making loans. Increased deposits by citizens means the banks will have more to lend out.

Answer 2

The banks can borrow against savings' account, but if the savings are low, they need to borrow the currency from countries that have saved the money instead.

Answer 3

The more money a country's citizens save, the less of that money is available for other uses, leading to scarcity and an increased currency value.

The US has an extremely low (some say negative) savings rate, cash is generally in abundance (until recently) and the currency becomes devalued.