Reading this article on Why China Buys US Treasury Bonds I understand the notion of supply and demand affecting a currency value against the other and how they need to buy up the excess dollars they are paid in. I understand this on the basis if there is a lot of USD in factories bank accounts and no local currency (that the owners might want to invest in things within the country, property etc) then this will push up demand for local currency among the local market (as not as many of those owners would want to be investing in the USA). Or at least as I understand it.
It goes on to talk about GBP currency crisis after World War 2, with Pound Sterling being the worlds reserve currency even though counties did not intend to spend their reserves or invest in the UK and eventually sold off, leading to deteriorating economy and high interest rates.
My questions are:
This selling off, as i understand from a supply and demand perspective - would develue the currency. Interest rates were increased by the Bank of England by removing GBP from supply (how do the do this are notes destroyed?)
If the UK was exporting more than it imports, then a falling currency would be beneficial as it would allow demand to increase due to buying power of other countries. Was this the case, or are there other issues at play?
What books would you recommend for learning more about these mechanics - exchange rates and pegging etc have always been a mystery, but learning more about the nuances of supply and demand would be useful.
Thanks in advance for the time and helping in my journey of understanding econimics in more detail!