Exchange Rates and Currency Exchange

It is very easy to confuse the two relative currencies, their values, and the concepts of appreciation and depreciation. For example, if the exchange rate increases between currency A relative to a unit of currency B, which exchange rate appreciated? If currency A has increased per unit of currency B, then it takes more money of currency A to buy one unit of currency B. As a result, currency B appreciates because a single unit of currency B can now buy more of currency A. For example, if the exchange rate is $US$1.0218$ relative to $C$1$ and it increases to $US$1.0318$ relative to $C$1$, then the Canadian dollar purchases one penny more. The figure helps you understand the relationships involved and provides a visual reminder of which direction everything is moving.