Exchange Rate FAQs

How does currency appreciation hurt a country’s exports?

Currency appreciation is the increase in value of one currency compared to another. Currencies increase in value against each other for several economic reasons. The state of the country’s finances and number of trading strength are the key factors. As a Currency appreciates it becomes more expensive to buy exports from the country in question.  Countries do their best to avoid appreciation from happening as it can cause their economy to retract and further affect the value of the currency. More expensive exports mean less demand for your goods.

The reason why China has become such a powerhouse when it comes to exports is because it has kept its currency from appreciating and its exports cheap. Cheaper exports mean greater income for a country and the same happens in reverse if a currency appreciates.