Question

In January 2001, the euro/dollar exchange rate was 1.10, and in January 2002, the euro/dollar exchange rate was 1.120. What happend to the exchange rate during this period?

A. Euro depreciated against the dollar
B. Euro appreciated against the dollar
C. Dollar appreciated against the euro
D. Both B and C

Answer 1

Answer:

B. Euro appreciated against the dollar

Explanation:

Depreciated means a decrease in value. Therefore, option A is incorrect. Since the exchange rate of Euro increases, the dollar cannot be appreciated at the same time. So, C cannot be the answer. If "C" is incorrect, both "B" and "C"; it means "D" is incorrect.

Hence, option "B" is correct because the foreign exchange rate of Euro increases relative to the exchange rate of the dollar in 2002. If there is an increase of a currency relative to others, the increased currency is said to be appreciated.