Rupee depreciation or appreciation – What does it mean? September 25th, 2011 Posted in Investments
A friend of mine asked me once if rupee touched 50 from 40, is it appreciation of rupee or depreciation of rupee. According to him, he always gets confused in understanding the concept of rising and falling rupee and when it is called as rupee depreciation and rupee appreciation.
In fact, I had the same confusion when I started learning the concepts of foreign exchange.
Before we discuss on rupee appreciation or depreciation, on point to keep in mind is you have to consider one more currency to compare. As the US dollar is one of the worlds most important currency, so the currency compared with rupee is US dollar (USD).
Lets take an hypothetical example, 1 USD = Rs 50 now, 1 year before 1 USD was Rs 43.
It means what with 1 dollar you can get more rupee as against last year. It also means rupee has depreciated or the value of rupee has come down.
Lets take another hypothetical example — 1 USD = Rs 50 now, 1 year before 1 USD was Rs 70.
It means that with 1 dollar you are getting less rupee today what you would have got last year, so the value of rupee has increased or rupee has appreciated.
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Read more about — What is rupee appreciation?
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