If an exchange rate is above the equilibrium rate (and exchange rates are flexible) the exchange rate will tend to fall.

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If the exchange rate is above the equilibrium rate, it means that the domestic currency is overvalued compared to the foreign currency. This makes exports relatively more expensive and imports relatively cheaper, thus increasing demand for foreign currency and decreasing demand for domestic currency. As a result, the exchange rate tends to fall until it reaches the equilibrium rate where supply and demand for both currencies are balanced. This process is facilitated by the flexibility of exchange rates, which allows them to adjust to changes in market forces.

If an Exchange Rate Is Above the Equilibrium Rate (And