If one country's price level falls relative to another's, its currency should appreciate.
PPP refers to Purchasing Power Parity. It is the concept by which the value of currencies of two countries are balanced. So when there is exchanges of goods between countries, the price changes in any of the countries involved should be taken into account. That is why if there is a price fall in one country, its currency should appreciate.
The theory of purchasing power parity states that the exchange rates between two countries should be adjusted according to the price levels in each country.
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