What action by traders could lead to a depreciation of a currency?

Traders selling off large amounts of a currency can lead to its depreciation due to the basic principles of supply and demand in the foreign exchange market. When traders decide to sell a significant volume of currency, they increase the supply of that currency in the market. If the demand for that currency does not increase correspondingly, the value of the currency will fall as more becomes available. This oversupply can create downward pressure on the currency’s exchange rate against other currencies, leading to depreciation.

In contrast, purchasing government bonds, attracting foreign direct investment, and increasing interest rates typically bolster a currency's value. Buying government bonds involves investors putting money into that currency to purchase the bonds, hence increasing demand for the currency. Foreign direct investment represents an influx of capital into a country, further increasing demand and usually strengthening the currency. Higher interest rates often attract foreign investors looking for better returns on their investments, also increasing demand for the associated currency, thus supporting or enhancing its value.