What happens when a currency gets stronger?
In the event of a revaluation, the exchange ratio of at least two currencies (exchange rate) changes. For example, an appreciation of the euro compared to the dollar means that less euros have to be paid for one dollar. On the one hand, the appreciation of a currency leads to a deterioration in the competitive position of the country concerned, since its export goods become more expensive. The more it is involved in the international division of labor, the greater the impairment. Lower exports will have a negative impact on the national economy. On the other hand, the revaluation will reduce spending on imported goods, which will boost demand for them. In addition, the cheaper imports may give the central bank room to lower interest rates.
Shift in the exchange rate of the domestic currency in relation to foreign currencies. When quoting prices, e.g. B. DM / 1 US- $ (volume quotation: e.g. £ / 1 DM), the exchange rate falls (rises) in response to the appreciation.
A currency is considered to have appreciated if foreign economic entities pay more for it in their own currency.
The rate of the US dollar increases from EUR 1.60 to EUR 1.76. The dollar has appreciated 10% against the EUR. A revaluation makes exports more difficult and makes imports easier if it is not caused by fluctuations in purchasing power but, for example, in interest rate differentials or interventions. If a currency is revalued, there is a corresponding devaluation for the comparison currency.
The EUR in US dollar exchange rate for the above example would decrease from 0.63 to 0.57 US dollars, which corresponds to a devaluation of the EUR by 9.5%.
is a change in the exchange rate with the result that a higher amount of foreign currency has to be paid for a domestic currency unit. For foreign currencies, less domestic currency has to be paid. The revaluation of the domestic currency has the effect of reducing exports, since the foreign buyers have to pay more in their own currency if the prices remain unchanged. Contrast: devaluation.
In socialist economics: increasing external value through increasing demand on the currency markets or through an act of the monetary authorities.
A revaluation makes exports more expensive and imports cheaper. In the case of currencies that are based on a system of fixed rates and a common parity basis, an appreciation means an increase in their currency parity (rate improvement). Under the conditions of flexible exchange rates (floating), the external value of a currency improves compared to other currencies (rate improvement). > Currency
Also: revaluation, revalvation. Increase in the external value of a currency. This can be done according to the market, i. H. by increasing the exchange rate of one's own currency against other currencies in foreign exchange trading or the market. Revaluations and devaluations of a currency in this form take place permanently on the foreign exchange market depending on the current supply and demand situation. You put flexible - freely fluctuating or at least. within certain limits free - exchange rates ahead. I. e. One speaks of currency appreciation when the parity or central rate of one's own currency is raised against other currencies by order of the government or the central bank of a country. This type of appreciation can be found in currency systems with fixed exchange rates or those with level flexibility in which the exchange rates can fluctuate within certain limits (intervention points, ranges). Currency appreciation usually takes place as an adjustment to the price or purchasing power relationships between home and abroad, with significantly lower currency depreciation in one's own country than in other countries. After the revaluation, if the foreign currency is quoted, less domestic money has to be paid for in foreign currency than before, or in the case of volume quotation, more foreign currency is received for the domestic monetary unit than before. A revaluation - assuming unchanged commodity prices - makes imports cheaper and exports more expensive, expressed in foreign currency. In this way, strongly and sustainably active current accounts can be brought towards equilibrium. Revaluations are less common in reality, as they tend to lead to a passivation of the foreign trade balance of a country. Ggs .: devaluation, devalvation.
Change in the exchange rate of the domestic currency against the foreign currencies, which is associated with an increase in the exchange rate in the quantity quotation ($ / l DM); the domestic currency unit is worth more after an appreciation in the foreign currency. If the exchange rates are given in the price quotation (DM / 1 $), as is customary in the Federal Republic of Germany, an appreciation can be read from the fall in the exchange rate. Z. B. the exchange rate of the US $ from 1.60 DM to 1.50 DM, the DM has appreciated against the $. In the opposite case, a rise in exchange rates is called devaluation. A revaluation always takes place in a flexible exchange rate system when the demand for domestic currency (from exports, domestic transfers, capital imports, foreign exchange sales by the central banks) exceeds the supply of domestic currency (from imports, foreign transfers, capital exports, Foreign exchange purchases by the central banks). In a fixed exchange rate system, revaluation means the setting of parities to other currencies if the supply and demand forces remove the market rate from the agreed parity rate beyond a specified range and this parity rate is no longer to be defended by the central banks involved. An appreciation tends to make domestic exports more expensive on world markets and make imports cheaper. With a normal reaction, an appreciation worsens the current account, i.e. the surplus is reduced and in extreme cases even replaced by a deficit (balance of payments mechanism).
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