Currency depreciation can be caused by economic fundamentals, interest rate differentials, political instability, or risk aversion. Orderly currency depreciation can boost country's export activity by making its goods and services affordable to consumers. Currency depreciation can occur in both absolute and relative terms
Relative devaluation occurs when value of one currency falls in relation to value of other currencies. British pound sterling, for example, may be depreciation more in US dollars today than it was yesterday. This does not necessarily imply that the US dollar is worth less than it was the day before in terms of real purchasing power.
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