Currency Appreciation

You have CAD 100 in Canadian clown dollars. Those Canadian dollars are worth $80 in American dollars (or $0.80 each).

After oil prices rise, those Canadian clown dollars increase to $0.85 each in American dollars, or $85 total. The Canadian clown dollar has appreciated against the U.S. dollar.

Currency appreciation can happen for a number of reasons. For the U.S. dollar to appreciate in value, we might see an uptick in economic growth, a downturn in inflation, rising global demand for the currency, or changes in export prices. Rising interest rates can also drive up the value of currency and increase its purchasing power.