Describe what "currency appreciation" means.

Currency appreciation refers to the increase in the value of a currency relative to other currencies. When a currency appreciates, it means that it can buy more foreign currency or goods priced in foreign currencies. This often occurs due to various factors, including economic stability, increased interest rates, or improvements in a country's economic outlook, making it more attractive to foreign investors.

As a result of currency appreciation, exports may become more expensive for foreign buyers, potentially leading to a decrease in export volumes, while imports become cheaper, which may encourage more domestic consumers to purchase foreign goods. This dynamic can significantly influence a country's trade balance and overall economy. Understanding currency appreciation is crucial for analyzing exchange rates and international trade relationships.