Currency Exchange Rate

Am abit confused with the question below.

The solution says (According Kaplan Schweser 2014 Qbanks), “CAD has appreciated by 4.0%, and the JPY has depreciated by 3.8%”.

Kindly assist.

The Canadian dollar (CAD) exchange rate with the Japanese yen (JPY) changes from JPY/CAD 75 to JPY/CAD 78. CAD has:

a. depreciated by 3.8%, and the JPY has depreciated by 4.0%

b. appreciated by 3.8%, and the JPY has depreciated by 4.0%

c. appreciated by 4.0%, and the JPY has depreciated by 3.8%

Best Regards

When you get a quote such as JPY/CAD 75 (meaning JPY75 = CAD1.0), you can save yourself a lot of headaches if you think of the base currency – CAD in this case – as if it were a commodity (which, in fact it is): oil, say.

If you think of CAD as oil, then the price of oil has gone from JPY75 to JPY78: oil has appreciated (increased in price).

When you invert the quotes – CAD/JPY 0.0133 and CAD/JPY 0.0128, respectively – then you see that the price of JPY (the commodity in these quotes: the oil) has decreased in price, from CAD0.0133 to CAD0.0128.

I cover this in the article I wrote on currency exchange rates: http://financialexamhelp123.com/currency-exchange-rates/.

Many Thanks S2000.

Reading your article now.

Regards

You’re quite welcome.

Another tip:

Sometimes the question will be posed differently. When the question says “relative” you are talking about the currency on the left hand side. So in the context of this question: “Relative to the JPY the CAD has appreciated 4%”

Your point is noted

Many Thanks