What is depreciation in forex?
Currency depreciation refers to the decrease in the value of a country’s currency relative to other currencies. It occurs when the demand for a currency falls, often due to a decrease in the country’s economic performance or political stability. It is the opposite to appreciation.
Currency depreciation can lead to an increase in the price of imported goods and inflation in the country, but it can also make exports cheaper and more attractive to foreign buyers.
Example of currency depreciation
In case the value of the U.S. Dollar decreases compared to the Euro, it means that the U.S. Dollar has depreciated.
As a result, goods and services denominated in U.S. Dollars become more expensive for individuals or businesses holding other currencies, potentially affecting international trade and travel.