FOREX

Let me see if im able to clear you with example.

Suppose you can buy a reynold pen with Rs.8. Equation would be

1Pen=Rs.8

After 10 days pen becomes expensive. Now equation is

1Pen=Rs. 10

What is happening here is For a pen which u can buy earlier at Rs. 8 now you have to pay Rs. 10.

It means Value of Rs. Down because you have to pay more Rs. for a same unit and Value of Pen rise because you have to pay Rs.2 Extra for the same pen.

Now replace pen with Dollar.

I dont know whether it is right but i had understood this concept in the same manner.

It is important to note that the value of a currency is always given in terms of another currency. Thus the value of a US dollar in terms of indian Rs is the Rs/$ exchange rate. The value of the Indian Rs. in terms of dollar is the $/Rs. exchange rate.

Currency appreciation - a currency appreciates with respect to another when its value rises in terms of the other. The dollar appreciates with respect to the rupees if the Rs/$ exchange rate rises.

Currency depreciation - a currency depreciates with respect to another when its value falls in terms of the other. The dollar depreciates with respect to the yen if the Rs/$ exchange rate falls.

Note that if the Rs./$ rate rises, then its reciprocal, the $/Rs rate falls. Since the $/Rs rate represents the value of the rupees in terms of dollars, this means that when the dollar appreciates with respect to the rupees, the rupees must depreciate with respect to the dollar.

Let me try if I can give you example.

If Today Dollar rate is 48 i.e $1 = Rs.48.

If after some days Dollar rate increase to 50 i.e $1 = Rs.50. it appreciates US $ currency and depreciates Indian Rs. as we have to pay more by Rs.2.

Maine kya bataya. Main bhi wohi keh raha tha

Yes Rahul..u r rite.....