For instance, when the EUR/USD exchange rate moves from 2.05 to 2.10, it means that the euro has appreciated by $0.05 against the US dollar. One euro now costs $2.10 instead of $.05.
There are many reasons why a currency appreciates.
Monetary and fiscal policy, interest rates, inflation, the trade balance, other countries’ economic strength, tourism figures, political stability, and many other macroeconomic conditions all contribute to exchange rate fluctuations and the appreciation of a currency relative to other currencies.
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