Please can you explain the dual effects of appreciation and depreciation of currency on the imports and exports and also on the current as well as financial accounts. I have got really confused...also what is better? An apreciating currency or a depreciating one?
Appreciation of currency is the rise in the value of domestic currency in terms of foreign currency, i.e. lesser of domestic currency is required to buy foreign currency. Take the example of Rupee and Dollar. Current rate is say, 1$=Rs.60 rate after appreciation will be 1$=Rs.58. Apply converse for depriciation.
