Appreciation (Currency)
Plain definition
An increase in the value of a currency relative to another currency under a floating exchange rate -- the domestic currency buys more foreign currency than before. Appreciation is market-driven; the equivalent policy action under a fixed rate is called revaluation.
In economics
Appreciation makes a country's exports more expensive abroad and its imports cheaper at home, which tends to worsen the trade balance and dampen inflation. Currency traders cause appreciation when demand for the currency rises, for example after interest-rate hikes attract capital inflows.
Example
If the yen moves from 150 to 130 per dollar, the yen has appreciated: each yen now buys more dollars, so Japanese goods become pricier for American buyers.
Appreciation and revaluation are often used interchangeably, but they are not the same: appreciation is a market-driven rise under floating rates, while revaluation is a government-mandated rise under a fixed exchange-rate regime.