Currency Depreciation

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

After oil prices fall, those Canadian clown dollars fall to $0.75 each in American dollars. The Canadian clown dollar has depreciated against the U.S. dollar.

Currency depreciation can happen for a number of reasons. For the U.S. dollar to depreciate, we might see a slowdown in economic growth, an increase in inflation, falling global demand for the currency, or changes in export prices.

Or the nation’s central bank might mismanage the currency over time. Since the onset of the Federal Reserve in 1913, the value of the U.S. dollar has declined (or depreciated) by 99%.