Exchange Rate

Exchange Rate is the rate at which one currency of a country can be converted for another country’s currency. The appreciation and depreciation of the currency can be described from exchange rates.

For example, if the exchange rate between the British pound and the U.S. dollar (GBP/USD) increases from 1.70 to 1.75. It means that the USD would appreciate relative to the GBP. If an exchange rate increases, the currency in the denominator of the exchange rate appreciates relative to the currency in the numerator.

If the exchange rate between the British pound and the U.S. dollar (GBP/USD) decreases from 1.70 to 1.65.  It means that the USD would depreciate relative to the GBP. If an exchange rate decreases, the currency in the denominator of the exchange rate depreciates relative to the currency in the numerator.