I found this to be very interesting. Pardon my lack of knowledge, but why would their currency appreciate if they did not invest in US bonds or if they had internal investment? What is the mechanism at work in this situation?
Edit; I kind of get it about the internal investment. If they invest there, they need to get a return and the only way to do that is by raising the prices of their goods. Is that it? Is it similar for the purchasing of bonds?