Inside the Currency Market: Mechanics, Valuation, and Strategies

U.S. Current and Capital Account

For the United States, the two most important components of the balance of payment are the Current and Capital Accounts. The Current Account measures trade in goods and services based on inflows and outflows, a standard measure that traces back to the classical model. It is a measure of the value of imports to exports. The term merchandise trade is used by the popular media to characterize these numbers.

Next, the Capital Account measures the total outflow of net capital account payments. Income Accounts measure receipts and payments of foreign-owned assets in the United States and U.S.-owned foreign assets. The last category is the unilateral account that includes transfer payments to foreigners, such as grants. ...