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Currency Depreciation vs. Appreciation: Definitions & Examples

What Are Currency Depreciation and Appreciation?In the foreign exchange market, currency depreciation occurs when the value of one currency falls compared…



Currencies trade against each other in the foreign exchange market, which is the biggest financial market by trading value in the world. 


What Are Currency Depreciation and Appreciation?

In the foreign exchange market, currency depreciation occurs when the value of one currency falls compared to the value of one or more other currencies. On the flipside, currency appreciation occurs when one currency gains in value compared to one or more other currencies.

What Is the Foreign Exchange Market?

The foreign exchange market (also referred to as forex and FX) is where currencies are traded, and as a whole, it is by far the biggest market in the world on a daily trading basis, exceeding the average daily trading turnover in the bond and stock markets. According to the Bank for International Settlements—a financial institution that is controlled by central banks worldwide and serves as their bank—daily turnover on foreign exchange markets exceeded $6 trillion in 2019, the latest year in which data was compiled.

Trading in the forex market affects the relative values of various currencies, and the relative values established by the forex market create the exchange rates at which travelers and other consumers can exchange currencies.

Foreign exchange is an integral part of global business, and reportedly, about 40 percent of the earnings of companies that make up the S&P 500 Index come from overseas. That means these companies have to repatriate money earned in euros, yen, pounds sterling, Swiss francs, Brazilian reais, Canadian dollars, Indian rupees, and other currencies back into U.S. dollars through these foreign exchange markets. When a currency appreciates or depreciates, it can have a large impact on a company’s bottom line.

Why Do Currencies Depreciate and Appreciate?

The value of a nation’s currency typically changes because of events or policies undertaken by that country. A single factor or a combination of factors may contribute to a currency’s change in valuation. A floating currency is more subject to depreciation or appreciation than one whose rate is fixed to the value of another currency. For example, the Canadian dollar is a floating currency, so the market dictates its value. The value of the Hong Kong dollar, on the other hand, is pegged at a fixed exchange rate to the U.S. dollar.

Interest Rates

An increase in a country’s interest rates tends to make its currency more valuable. A higher interest rate may lead to higher rates on sovereign debt, making it more attractive to domestic and international investors. A country lowering interest rates, on the other hand, might make its assets less attractive.


Another prime factor that influences a currency’s direction is a nation’s trade balance. A deficit in the current account, which represents the broadest measure of trade in goods and services, could mean that there’s less demand for the local currency because there are more goods imported than exported. A current account surplus, on the other hand, indicates that a country sells more goods abroad than it imports, and that translates into more demand for the local currency.


Investors may sometimes turn to speculation and target a country’s currency for a profit. For example, in 1992, George Soros made a profit exceeding a billion dollars when he bet against the British pound, which dropped significantly against the dollar because it was viewed as overvalued at the time.


A change in a nation’s political future may prompt investors to trade for or against that country’s currency. Uncertainty over leadership may cause the currency to depreciate, while optimism for the nation’s future may lead to appreciation.

Global Influences

Worldwide or international events may cause currencies across countries to depreciate or appreciate. For example, at the start of the COVID-19 pandemic in 2020, nations closed their borders, which resulted in global trade coming to a virtual halt, tourism declining, and people not spending. As a consequence, currencies depreciated.

How to Calculate Depreciation and Appreciation

A change in the value of one currency against another is typically expressed as a percentage. When calculating the change in the value of one currency (using another as its benchmark), it’s important to note which is the base currency and which is the price currency.

Calculating Depreciation or Appreciation Using Base Currency

([New Price Currency / Base Currency ] / [Old Price Currency / Base Currency]) — 1 = Depreciation (Negative Percent Change) or Appreciation (Positive Percent Change)

For example, let’s say a U.S. dollar fetches 20 Mexican pesos during trading on a Monday. In this case, the base currency is the U.S. dollar, while the price currency is the Mexican peso. Monday’s exchange rate can be expressed as 20 Mexican pesos per U.S. dollar. The following day, Tuesday, the dollar is quoted at 22 Mexican pesos.

In this equation, the price currency is the numerator, and the base currency, which is represented as 1, is the denominator.

Using the equation above, ([20 / 1] / [22 / 1] ) — 1 = (20 / 22) — 1 = 0.909 — 1 = -0.0909 = -9.1 percent.

That translates to a 9.1 percent depreciation in the Mexican peso compared to the U.S. dollar.

Calculating Depreciation or Appreciation Using Price Currency

([Base Currency / New Price Currency] / [Base Currency / Old Price Currency]) — 1 = (Old Price Currency / New Price Currency) — 1 = Depreciation (Negative Percent Change) or Appreciation (Positive Percent Change)

To measure the dollar’s change to the peso, this formula for the base currency would be used—it is the inverse of the previous formula. Filling in the Mexican peso as the base currency and U.S. dollar as the price currency, ([1 / 20] / [1 / 22]) — 1 = (22 / 20) — 1 = 1.1 — 1 = 0.1 = 10 percent.

Looked at from this angle, the U.S. dollar appreciated in value by 10 percent compared to the Mexican peso.

Notice that these two results are different. One currency, the Mexican peso, weakened against another currency, the U.S. dollar. But it can also be looked at from the other side—the U.S. dollar strengthened against the Mexican peso.

The depreciation of one currency shows appreciation in the opposing currency.


Note: Technically, a currency’s depreciation cannot exceed 100 percent. Rather than express it in mathematical terms, it is better to phrase it from its original level to its current level. For example, it makes more sense to say that the Mexican peso depreciated to 46 per U.S. dollar from 21 instead of saying it declined by 125 percent.

What Happens When a Nation's Currency Depreciates?

When a country’s currency depreciates, its central bank can intervene in an attempt to prevent the currency from depreciating further. Their main tool in stemming a decline is the use of international reserves, which are typically in U.S. dollars.

Central banks, especially in developing nations with trade surpluses, tend to save dollars as a way to help strengthen their balance sheets because the U.S. dollar is viewed as stable and has been serving as the world’s currency of choice for the past few decades.

If a currency comes under attack from speculation, a country’s central bank could buy back its national currency by selling U.S. dollars in the foreign exchange market. Sometimes, a central bank can use up almost all of its international reserves with disastrous results that leave it with few resources to defend its currency, leaving the country vulnerable to a freefall of depreciation. For countries that have high debt relative to gross domestic product, this can mean risking a pick-up in inflation and defaulting on debt.

How Do Depreciation and Appreciation Affect a Nation’s Economy?

A stronger currency can have upsides as well as downsides for a country. In the U.S., for example, international investors are attracted to American assets, such as real estate, and U.S. government securities due to the strength of the U.S. dollar. At the same time, though, an appreciating currency could make asset prices higher, raising the specter of an acceleration in inflation.

Real-World Examples of Currency Depreciation


In 1990, the U.K. joined the EU's Exchange Rate Mechanism (ERM), which allowed its currency to be fixed against other European currencies but allowed to trade within a range. In 1992, the British pound was viewed as overvalued and was coming under attack from speculators. The pound sterling decoupled from the ERM and traded freely, but its value depreciated, allowing speculators like George Soros to pocket huge profits. The U.K.’s response to prevent the pound’s sudden depreciation was a steep increase in interest rates and buying its currency in the foreign exchange market.

East Asia

In the lead-up to the 1997–98 East Asian currency crisis, nations such as Thailand, Indonesia, the Philippines, Malaysia, and South Korea were building up years of deficits in their current accounts. Yet, their currencies remained relatively stable, and their exchange rates traded against the dollar in a narrow range for many years.

The Thai baht was the first currency to come under attack, and the central bank tried to defend the baht by selling dollars from its international reserves until almost all of its reserves were gone and the baht traded to float freely. The baht lost half its value, and depreciation in currencies of other East Asian nations followed. Economies went into recession, marked by high unemployment rates and accelerating inflation. Businesses collapsed as their dollar-based loans became difficult to repay.

Currencies of many countries affected in this contagion have yet to return to their pre-1997 crisis levels, and it took years for some countries to bring back their international reserves to earlier levels. One benefit from their depreciating currencies was that purchasing goods produced in their countries became cheaper, pushing their current accounts into surpluses.

Sri Lanka

In 2022, after years of mismanagement of the country’s finances, a persistent current account deficit, and an unpopular government, Sri Lanka’s rupee depreciated to record levels. In its economic collapse, prices for consumer goods such as gasoline and food skyrocketed.

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Here’s Why Your Boss May Reject Your Business Travel Request

People are taking vacations again, but a once dominant travel sector is struggling to recover.



People are taking vacations again, but a once dominant travel sector is struggling to recover.

Now that vaccines are readily available and President Joe Biden has declared that the pandemic is officially over, people are flying again. But they’re really not happy about it.

The research firm J.D. Power found that last year, when the airline industry first started to cautiously rebound, consumer satisfaction with airports reached an all-time high. But this was very likely both because of a relatively smaller sample size and that so many people were happy to fly again that they were willing to overlook a lot of what has become headache-inducing about modern airfare travel.

J.D. Power  (JD) - Get Inc. Report has found that this year, global passenger levels are nearly back up to 91% of pre-pandemic levels. 

Customer satisfaction has dropped sharply, 25 points on a 1,000-point scale, to 777, as more people have returned to airports, for reasons ranging from an increase in flight cancellations and delays to inflation-driven increases in the cost of airport food.

But while airlines are aware that customers aren’t happy, and that the Biden Administration might try to right the ship with proposals that airlines likely won’t care for, at least people are flying again.

But an additional survey by J.D. Power has revealed that while people are flying again, traveling for business (be it for in-person meetings or industry conferences), has been lagging behind and recovering at nearly the rate of traveling for pleasure. 

Is Traveling for Business on the Way Out?

J.D. Power’s research has found that many travelers doubt that travel levels will increase dramatically from where they are now, and that “a strong majority of executives believe their companies will spend less in the next six months compared to the same period in 2019, for instance, due to things like fewer trips overall or fewer employees sent when there is a trip scheduled,” according to their data.

Overall, business travel has returned to “about 81% of 2019 levels,” notes Managing Director Michael Taylor. “83% was our prediction for this quarter, we’ll see how well we did in a few weeks and add a predication for Q4.”

J.D. Power

Fears of recession and the rising costs of air tickets from inflation play a factor in the decline of business travel. But overall, the main reason is that many of us have gotten so used to working at home that two-thirds of employees would rather find a new job than go back to the pre-pandemic status quo. If employees feel they can get work done from home and don’t feel like braving traffic to return to the office, why would they feel they need to get on a plane?

So have services like Zoom (ZM) - Get Zoom Video Communications Inc. Report and Slack made the business trip redundant? Taylor has his doubts.

“But will people be meeting exclusively in the 'Metaverse' rather than in person? I do not think that will happen,” he says. “There is too much information to be gathered in face-to-face meetings, spoken and unspoken, to be replaced completely by virtual ‘reality.’”

Getty Images

So is This It for Business Travel?

Back in the heady pre-pandemic days three years ago, airlines could rely on the extra income from people whose jobs entailed a great deal of travel, and who had come to the realization that if they were going to spend a chunk of their lives on the road, they could splurge to make it a more comfortable experience. 

But if airlines want this sector to return, Taylor thinks it’s their duty to make it a more appealing option, because frequent delays and other headaches are enough to make anyone stick to Zoom.

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Airlines, Taylor says, must “create more of a “living room” experience for travelers, one that “makes travelers feel valued as patrons of the airlines, and makes people feel like individuals rather than cattle.”

Because while it’s hard to argue with the convenience, Taylor insists there is still something to be said for the occasional in-person meeting. 

“Millenia of evolution in mankind has created an awareness that can’t be described with words on a page or pixels on a screen,” he says. “People will still find advantages in meeting in-person rather than online.”

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PR Newswire
DULUTH, Ga., Sept. 28, 2022

In recognition of World Rabies Day on September 28, the d…




PR Newswire

In recognition of World Rabies Day on September 28, the donation is for use on tribal lands and underserved communities in collaboration with Greater Good Charities

DULUTH, Ga., Sept. 28, 2022 /PRNewswire/ -- Boehringer Ingelheim, a global leader in veterinary rabies vaccines, has expanded its commitment to help prevent rabies in dogs by donating nearly 100,000 doses of rabies vaccine. The donation is part of the relaunched SHOTS FOR GOOD℠ program and will be used on tribal lands and in underserved communities across the United States.

Rabies is a zoonotic, viral disease, which can be transmitted through wild animals and pets. Once clinical symptoms appear, rabies is virtually 100% fatali. Even though it is vaccine-preventable, around 59,000 people still die from rabies every year globallyii. Rabies is present on all continents, except Antarctica, with over 95% of human deaths occurring in the Asia and Africa regionsiii. It can pose a significant risk anywhere if dogs are not vaccinated. Dogs are the main source of human rabies deaths, contributing up to 99% of all rabies transmissions to humansiv.

"Boehringer Ingelheim fervently believes no animal should suffer from a preventable disease," said Dr. Julie Ryan-Johnson, head veterinarian for shelters at Boehringer Ingelheim and board vice chair for Greater Good Charities. "Together with Greater Good Charities we can fight the presence of rabies on tribal lands and in underserved communities to keep pets healthier and happier for longer."

Boehringer Ingelheim Animal Health established the SHOTS FOR GOOD initiative in 2019 in Puerto Rico and underserved communities in California, Nevada, Oklahoma, Texas, North Carolina, Louisiana, Mississippi, and Florida. However, in 2020, the initiative was suspended due to global pandemic restrictions.

Since relaunching the program earlier this year, and in collaboration with the global nonprofit, Greater Good Charities, the program has enabled vaccination clinics throughout tribal lands in Alaska, Arizona, Colorado, Montana, and Utah. Additional vaccines have been utilized in Hawaii as part of Greater Good Charities' Good Fix program which offers high-quality, high-volume spay/neuter to help control pet overpopulation in underserved communities.

"In observance of World Rabies Day, we recognize the positive impact of vaccination events to raise awareness about rabies and how to prevent this deadly disease," said Denise Bash, vice president at Greater Good Charities. "The generous vaccine donations from Boehringer Ingelheim Animal Health and the Shots for Good initiative helps to protect pets while making this important effort possible."

About World Rabies Day

World Rabies Day, held every year on September 28, is observed by the United Nations as an International Day. Coordinated by the Global Alliance for Rabies Control, it is a day to raise awareness about rabies and how to prevent this deadly disease. Hundreds of events are held by organizations and individuals around the world in recognition of this day.

About Boehringer Ingelheim

Boehringer Ingelheim Animal Health is working on first-in-class innovation for the prediction, prevention, and treatment of diseases in animals. For veterinarians, pet owners, farmers, and governments in more than 150 countries, we offer a large and innovative portfolio of products and services to improve the health and well-being of companion animals and livestock. As a global leader in the animal health industry and as part of family-owned Boehringer Ingelheim, we take a long-term perspective. The lives of animals and humans are interconnected in deep and complex ways. We know that when animals are healthy, humans are healthier too. By using the synergies between our Animal Health and Human Pharma businesses and by delivering value through innovation, we enhance the health and well-being of both.

Learn more about Boehringer Ingelheim Animal Health USA Inc. at  

About Greater Good Charities

Greater Good Charities is a 501(c)(3) global nonprofit organization that works to help people, pets, and the planet by mobilizing in response to need and amplifying the good. Greater Good Charities, with a 100/100 rating on Charity Navigator, has provided more than $475 million in impact, including cash grants, in-kind supplies, and programmatic support, to charitable partners in 121 countries since 2007. To learn more about how Greater Good Charities amplifies the good across the globe, please visit

Media Contact:
Chrissy Jones
Boehringer Ingelheim Animal Health
U.S. Communications
(516) 527-5456 


i World Health Organization: Rabies ( (downloaded: April 1, 2022)
ii World Health Organization: Oral rabies vaccine: a new strategy in the fight against rabies deaths ( (downloaded: April 1, 2022)
iii World Health Organization: Rabies ( (downloaded: April 1, 2022)
iv World Health Organization: Rabies ( (downloaded: April 1, 2022)

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Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date
PR Newswire
CAMBRIDGE, Mass., Sept. 28, 2022

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ — Cambridge Bancorp (NASDAQ: CATC), th…



Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

PR Newswire

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC), the parent company for Cambridge Trust Company ("Cambridge Trust"), today announced all regulatory approvals relating to the proposed merger between Cambridge Trust and Northmark Bank have been received. The shareholders of Northmark Bank approved the merger at a special meeting held on August 31, 2022.  The anticipated closing date of the merger is October 1, 2022, subject to the satisfaction of other closing conditions.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 132-year-old Massachusetts chartered commercial bank with approximately $5.1 billion in assets at June 30, 2022, and a total of 19 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England's leaders in private banking and wealth management with $4.0 billion in client assets under management and administration at June 30, 2022. The Wealth Management group maintains offices in Boston and Wellesley, Massachusetts and Concord, Manchester, and Portsmouth, New Hampshire.

Forward-looking Statements 

Certain statements herein may constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, the impact of any laws or regulations applicable to the Company, and measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 pandemic on the Company's business are forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following: the businesses of Cambridge and Northmark may not be combined successfully, or such combination may take longer to accomplish than expected; the cost savings from the merger may not be fully realized or may take longer to realize than expected; operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; changes to interest rates; the ability to control costs and expenses; the current global economic uncertainty and economic conditions being less favorable than expected; disruptions to the credit and financial markets; changes in the Company's accounting policies or in accounting standards; weakness in the real estate market; legislative, regulatory, or accounting changes that adversely affect the Company's business and/or competitive position; the Dodd-Frank Act's consumer protection regulations; the duration and scope of the COVID-19 pandemic and its impact on levels of consumer confidence; actions that governments, businesses and individuals take in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; a prolonged resurgence in the severity of the COVID-19 pandemic due to variants and mutations of the virus; the pace of recovery when the COVID-19 pandemic subsides; disruptions in the Company's ability to access the capital markets; and other factors that are described in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year end December 31, 2021, which the Company filed on March 14, 2022. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

Cambridge Bancorp
Michael F. Carotenuto
Chief Financial Officer

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