ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Currency appreciation is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances, and business cycles.

Detailed explanation-2: -The exchange rate of a currency is how much of one currency can be bought for each unit of another currency. A currency appreciates if it takes more of another currency to buy it, and depreciates if it takes less of another currency to buy it.

Detailed explanation-3: -A currency is said to appreciate when the base currency becomes more expensive in the currency pair w.r.t. quote currency. So for the USD/INR pair where $1 = Rs. 75 previously and now is $1 = Rs. 76, the Dollar is said to have appreciated w.r.t. Indian rupees.

Detailed explanation-4: -Appreciation is when a currency experiences an increase in value when it is compared to other currencies. Depreciation is when a currency experiences a decrease in value when it is compared to other currencies.

Detailed explanation-5: -The increase in the value of a currency usually leads to a lowering in the inflation rates. Currency appreciation effects largely have an impact on local businesses as their products and services become costlier and their demand goes down. They reduce their prices and workforce to survive the dip in demand.