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.

Read more about — What is rupee depreciation?

Read more about — What is rupee appreciation?

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