Lesson 3 of 9 · All lessons in this module
- The FX market: functions and participants
- Reading exchange rate quotes
- Percentage changes in exchange rates
- Nominal and real exchange ratesVideo lesson
- Why no currency regime is ideal
- The menu of exchange rate regimes
- Exchange rates, the trade balance and capital flows
- Capital restrictions
- Integrated cases: reading an FX and capital-flow brief
Lesson 3 of 9 · 11 min
Percentage changes in exchange rates
The percentage change in A/B measures the base currency's appreciation or depreciation; the other currency's move is found by inverting the quote and is never the same size.
In short
- Percentage change in an A/B rate = new rate / old rate − 1. It describes the base currency (B) against the price currency (A).
- A rise in A/B means B appreciated; a fall means B depreciated.
- To get the price currency's move, invert the quote first (B/A) and compute again.
- The two percentages are never equal in size: if B gains x, A loses , which is smaller.
- Working backwards: old rate = new rate / (1 + base currency's % change).
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