Appreciation of Currency  

An appreciation of a currency means that it becomes worth more relative to other currencies. It means there has been a rise in the exchange rate.

For example in recent years there has been an appreciation in the pound compared to the dollar

in 2006 £1 = $1.8

In 2007 £1 = $2

The Pound has appreciated - it means you now get more dollars for £1. It means US goods will appear cheaper to UK consumers.

The effect of an appreciation

The opposite of an appreciation is a deprecation.

Impact of Appreciation

If the currency appreciates due to speculative flows, it can cause problems for the economy. Exports will become uncompetitive, leading to lower domestic demand.

See: Problems of overvalued exchange rates

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