Definition
The relationship between the value of two different currencies, that is, the value or price of one country’s currency in terms of another currency.
Further information
For example, in 2020, the exchange rate of the euro against the dollar was $1.14/€ (average of daily data), indicating that with 1 euro, we could buy 1.14 dollars.
However, the value of the euro fluctuates continuously. If the value of the euro increases against the dollar, we say that the euro ‘appreciates’ against the dollar, which will allow us to buy more dollars with 1 euro. On the other hand, when we say that the euro ‘depreciates,’ it means that its value decreases against the dollar, the euro becomes weaker, and we will be able to buy fewer dollars with one euro.
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Update date: January 2025
