Why currency depreciation matters
It can raise import prices, support exporters, worsen foreign-currency debt, and reduce unhedged returns.
How it is applied
Analysts identify quotation convention and test inflation, financing, corporate, and portfolio effects.
Portfolio example
A currency moving from 10 to 12 units per dollar has weakened against the dollar.
How to interpret it
Depreciation differs from official devaluation, though effects can overlap.
Limitations and common misconceptions
Percentage changes depend on quotation direction and multiple rates complicate measurement.
Sources and further reading
- Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives MarketsBank for International Settlements
- Exchange RatesInternational Monetary Fund
- Currency Exchange RatesCFA Institute