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Appreciation of a currency

Definition

The appreciation of a currency refers to an increase in its value relative to other currencies, making it stronger and more valuable.

Analogy

Imagine you have a rare Pokémon card that suddenly becomes highly sought after by collectors. As a result, its value increases compared to other cards. This is similar to the appreciation of a currency, where the increased demand for and confidence in a currency lead to its value rising against other currencies.

Related terms

Trade Surplus: A trade surplus occurs when a country exports more goods and services than it imports, leading to an increase in demand for that country's currency.

Higher Interest Rates: When a country's central bank raises interest rates, it attracts foreign investors looking for higher returns on their investments. This increased demand for the country's currency can contribute to its appreciation.

Strong Economic Performance: If a country experiences strong economic growth and stability, it can attract foreign investment and increase confidence in its currency, resulting in appreciation.