A fall in the exchange rate is known as a depreciation in the exchange rate (or devaluation in a fixed exchange rate system). It means the currency is worth less compared to other countries.

• When there is a depreciation, and the exchange rate goes down,
  • Exports will be cheaper
  • Imports will become more expensive
• e.g. a depreciation of the dollar makes US exports more competitive but raises the cost of importing goods into the US.
• Therefore there will be an increase in exports and decrease in the quantity of imports.
• Domestic firms will benefit from increased sales. This may lead to job creation and lower unemployment, especially in export industries.
• The increase in (X-M will) help increase Aggregate Demand (AD) and therefore lead to higher economic growth

SEE ALSO

• Do exchange rates change daily
• Dollar To Rand
• History of the Rand
• How does a country manipulate its currency
• How does a currency depreciate?
• Is appreciation of currency good?
• South African Rand Historical data
• South African Rand Restrictions
• What happens when a currency weakens?
• What happens when exchange rate falls?