How to Calculate Currency Depreciation
A currency depreciates by (new exchange rate − old exchange rate) ÷ old exchange rate × 100, and the size of the negative result is the percentage fall.
The Currency Depreciation formula
Calculator
Size a currency's fall from two rates, and see the larger percentage the other currency gained on the flip side.
Foreign currency per 1 unit of the falling currency, before the move.
The same quote after the fall, written the same way round.
The rate fell from 1.3 to 1.17, so this currency depreciated 10%.
- Change in the other currency
- 11.1%
- Old rate, quoted the other way
- 0.7692
- New rate, quoted the other way
- 0.8547
- Reading
- Depreciation
The other currency moved 11.1%, a different size from −10%, because each percentage divides by its own starting rate.
One unit of the other currency used to cost this much of the currency you are tracking.
The starting value that the other currency's percentage divides by, which is why the two figures never match.
A negative change is depreciation, and its absolute size is the percentage fall you quote.
How to calculate Currency Depreciation, step by step
- 1Quote the rate per unit of the falling currency. Write both the old and the new rate as units of the other currency per one unit of the currency you are tracking.
- 2Subtract and divide. Compute (new rate − old rate) ÷ old rate.
- 3Convert to a percent. Multiply by 100, and read a negative answer as depreciation of that size.
- 4Check the other currency separately. Recompute from the other side with that currency in the denominator, because the mirror percentage is always a different number.
Worked example: Currency Depreciation
Take an illustrative rate of 1 pound = $1.30 that falls to 1 pound = $1.17. The pound changed by (1.17 − 1.30) ÷ 1.30 × 100 = −10%, so the pound depreciated 10%. The dollar's side is not a 10% gain: the dollar went from 1 ÷ 1.30 = 0.7692 pounds to 1 ÷ 1.17 = 0.8547 pounds, a change of (0.8547 − 0.7692) ÷ 0.7692 × 100 = 11.1%. So the dollar appreciated about 11.1% while the pound depreciated 10%.
Currency Depreciation questions
What is the difference between depreciation and devaluation?
Depreciation is a market-driven fall in a floating currency's value, while devaluation is a deliberate cut announced by a government or central bank under a fixed or pegged rate.
Does depreciation help exports?
Yes, it makes the country's exports cheaper for foreign buyers and imports more expensive at home, so net exports usually rise after a lag.
Why is the mirror percentage a different number?
Each percentage divides by its own currency's starting value, and those two starting values differ. A 10% fall in the pound works out as an 11.1% rise in the dollar.
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