However, most of us, tend to confuse when we read that there is a Rupee Depreciation as it has moved from Rs50 per US$ to Rs55 per US$. A look at this change indicates value has increased but report reads that INR has depreciated. Undoubtedly it is confusing. Let us try to remove this confusion.
What is Rupee Appreciation and Rupee Depreciation ? What is meant by Rupee Depreciation and Rupee Appreciation ?
Now we will try to understand what is appreciation and depreciation refers to when we read such news on daily basis. Let us assumethat in case, you go to a bank and asks the bank that you intend to buy US$100, please tell me what is the amount of INR you have to pay. Bank informs you that you need to pay Rs 5410/-. This means you can buy US$ @ Rs.54.10 per dollar. This is the selling rate of the said bank for US $ for that day.
Now after one month, you go to bank and again ask the bank that you wish to buy US$ 100, and bank tells you that this time you have to pay Rs.5490. This means you have pay more to receive the same amount of US $. This means the local currency has depreciated.
This will be known as Depreciation of Indian Rupee. In the above example, it is clear that value...