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Tuesday, 26 June 2018

Appreciation of Currency

If a currency becomes expensive in relation to another currency then it is known as appreciation of currency. For example if you purchased a dollar earlier and paid 60 rupees and now you can purchase a dollar by paying 58 rupees , it is an appreciation of rupee against dollar because you are paying less rupees now to purchase a dollar.


Appreciation of Currency
Appreciation of Currency


Impact:

Import based industry will get benefited. Imports will become cheaper . Price of oil will decline and consequently prices of various products will reduce. Aggregate demand will increase resulting in increase in production. Current account deficit will be reduced to some extent.

On other hand , tourism industry will be affected negatively because tourism will become expensive.

Foreign education and medical services will become cheaper.

Export based industry will also be benefited because exporter will get more rupees now. But it has a negative side in case of exports of domestic products. Domestic products will stay expensive in foreign market , hence there may be decrease n demand of domestic products in foreign market.



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