Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a
floating exchange rateA floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency...
system. It is most often used for the unofficial increase of the exchange rate due to market forces, though sometimes it appears interchangeably with
devaluationDevaluation is a reduction in the value of a currency with respect to other monetary units. In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate...
. Its opposite is called
appreciation.
The
depreciation of a country's currency refers to a decrease in the value of that country's currency.
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Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a
floating exchange rateA floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency...
system. It is most often used for the unofficial increase of the exchange rate due to market forces, though sometimes it appears interchangeably with
devaluationDevaluation is a reduction in the value of a currency with respect to other monetary units. In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate...
. Its opposite is called
appreciation.
The
depreciation of a country's currency refers to a decrease in the value of that country's currency. For instance, if the Canadian dollar depreciates relative to the euro, the exchange rate (the Canadian dollar price of euros) rises - it takes more Canadian dollars to purchase 1 euro (1 EUR=1.5CAD → 1 EUR=1.7CAD).
The
appreciation of a country's currency refers to an increase in the value of that country's currency. Continuing with the CAD/EUR example, if the Canadian dollar appreciates relative to the euro, the exchange rate falls - it takes fewer Canadian dollars to purchase 1 euro (1 EUR=1.5CAD → 1 EUR=1.4CAD).