Impacts of Rupee Appreciation/Depreciation on Import
INTRODUCTION
CURRENCY APPRECIATION:-
An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country 's current account. Typically, a Forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency.
CURRENCY DEPRICIATION:-
A decrease in the value of a currency with respect to other currencies. This means that the depreciated currency is worth fewer units of some other currency. While depreciation means a reduction in value, it can be advantageous as it makes exports in the depreciated currency less expensive. For example, suppose one unit of Currency A is worth one unit of Currency B. If Currency A depreciates such that it becomes worth half of one unite of Currency B, then exports denominated in Currency A are only half as expensive when trading in a Currency B market.
SIGNIFICANCE:-
* When a country 's exports are high, the buyers of these exports need its currency to pay for those exports. * When the country 's central bank increases interest rates, people will want that currency to deposit in the banks to earn that higher interest rate. * When employment and per capita income in a country increase, the demand for its goods and services increases, along with demand for that country 's currency in the local market. * Demand for any country’s currency on the foreign exchange market is determined by demand for that country’s exports of goods and services and by changes in foreign investment in that country. This is because when foreigners buy another country’s exports of goods or services they must pay for these in the currency of the exporting country. * In the same way, Supply of any country’s currency on the foreign exchange market is determined by that country’s imports of goods and services and by its investment in other countries. * Thus when the demand for a
CURRENCY APPRECIATION:-
An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country 's current account. Typically, a Forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency.
CURRENCY DEPRICIATION:-
A decrease in the value of a currency with respect to other currencies. This means that the depreciated currency is worth fewer units of some other currency. While depreciation means a reduction in value, it can be advantageous as it makes exports in the depreciated currency less expensive. For example, suppose one unit of Currency A is worth one unit of Currency B. If Currency A depreciates such that it becomes worth half of one unite of Currency B, then exports denominated in Currency A are only half as expensive when trading in a Currency B market.
SIGNIFICANCE:-
* When a country 's exports are high, the buyers of these exports need its currency to pay for those exports. * When the country 's central bank increases interest rates, people will want that currency to deposit in the banks to earn that higher interest rate. * When employment and per capita income in a country increase, the demand for its goods and services increases, along with demand for that country 's currency in the local market. * Demand for any country’s currency on the foreign exchange market is determined by demand for that country’s exports of goods and services and by changes in foreign investment in that country. This is because when foreigners buy another country’s exports of goods or services they must pay for these in the currency of the exporting country. * In the same way, Supply of any country’s currency on the foreign exchange market is determined by that country’s imports of goods and services and by its investment in other countries. * Thus when the demand for a