ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is Currency Appreciation? 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: -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.

Detailed explanation-4: -Currency appreciation usually reduces inflation because imports become cheaper and the lower prices lead to lower inflation.

Detailed explanation-5: -Appreciation of the currency implies that lesser rupees are required to buy a dollar, or that a dollar can now buy goods worth lesser rupees than before. Accordingly, exports are likely to take a hit. On the other hand, imports are likely to increase.