 In this section, I will explain the importance of foreign exchange. So, foreign exchange plays a very important role in explaining the trade performance of a country. So, kisi bhi country ka jo international trade hai, bohath strongly depend karta hai ke foreign exchange ki values kya hai. Aur foreign exchange ki values bohath strongly depend karti hai ke uska trade ka situation kya hai, international trade ka situation kya hai. Because back end ke upar jo foreign exchange, iske back end ke upar jo cheese kaam karti hai foreign exchange ki value ko upar leke jaane ke liye ya kaam karne ke liye uske pichhe demand and supply ke forces hai. To jab aap zyada saman export karne ke kabil hai, to naturally jinn logho ne, pahir ke logho ne, ka saman kharidha hai, unko aapki karansi me pay karna hai aur aapki karansi ki demand upar chali jayegi to iska matlab hai ke aapki value of the currency will go up. Aur agar on the contrary, aap import karne, bohath zyada import karte hai, aapki exports nahi hai, naa hone ke brabar hai, yaa kaam hai as compared to your imports. To iska matlab hai ke jab aap import kare ho, bahair ke logho se saman kharidha rahe hai, to aapko unko payments karne hai, to jab aap payment karenge to unki karansi me karenge, to iska matlab hai unki karansi ki demand increase karegi, aapki karansi ke supply bhar jayega, to aapki karansi ki value kaam ho jaati hai, to jo basically trade ka performance or exchange rate, value of the currency in terms of the foreign currency, ye dono cheezin aapas me linked hai. aap jo exchange rate hai, bohath ahem hai, explain karne me ke aapki overall international trade ke upar kya asar aayega, to usra important cheez hai that is the balance of payment that also gets affected by the exchange rate aur overall aapki jo economy hai because jo international trade hoti hai, boh ek ahem component hai aapki overall income generation process ka, to aapki jo economic performance of our country hai, bohath jada significantly depend karti hai aur bohath se factors ke lava aapki exchange rate ke upar aur aapki trade ke volume ke upar. to therefore foreign exchange is something which is considered to be a very important variable. now, when we are dealing with foreign exchange we need to understand the concept of appreciation and the concept of depreciation. so jab haam appreciation kairin is ka matlab tarif karna nahi hai appreciation ka matlab hai increase in the value of a certain currency aur wo kyaise badegi? we know ke hame jab kisi bhi aadmi ko, kisi bhi company ko, kisi bhi hukumat ko payment karne hai foreign country mein to wo unke currency mein jayga wo haamare currency mein interested nahi hai to agar haamare currency ka supply increase kar jayga to aisa context mein demand ke relatively to haamare currency ka value uniche challa jayga aur agar haamare currency ka demand increase kar jayga is ka matlab hai ke zada se zada lo pakistani rupe leena chata hain ta ke wo pakistan mein aake sehar kar sakke pakistan mein aake pdayi kar sakke pakistan mein aaker abna ilaaj kar sakke pakistan mein aake abne kar khaane laga sakke to these are the four major reasons jiski piche aap ko foreign currency requirement hoti hai demand kar te haam to aisa karne se agar wo log zyada hain to peer uska value bhi automatically increase kar jayga aur increase is called appreciation to I will explain these two concepts using an example suppose 1999 ke andar ye real data hai asal wala data hai to in the beginning of 1999 for example jo euro hai that was equal to 1 euro was equal to 101.18 dollar aur jun ki jun 19 2017 mein 1999 se abhi iska value 1.18 se kum ho ke 1.12 chali gyi hai to agar hain is particular values dono values ko counter karein to aap dekh sakte hain ke jo current value hai that is 1.12 minus the previous value divided by the previous value to aap ke baas value aati hain minus 0.06 to agar hain is number ko percentage mein explain karein to iska matlab ye hai ke euro ki value 1999 se lekar 2017 tak 6% paul ki hai iska matlab hai ke euro depreciate hiya hai by 6% ishi taran se agar hain us dollar ki ishi time period ki values leinge to aap ko pada se alega ke wo appreciate hiya hai fine to abhi amne dekhah ke 1999 ke andar jo euro per dollar ki abhi dollar ki value hamne li that is not 0.85 euro per dollar in the beginning of 99 tha aur it was increased from 0.85 euro per dollar to 0.89 euro per dollar on june 19 217 dike to abhi abhi amne is particular values ko ushi taran se aapne current value minus old value divided by old value karein aap ke paas hai ka plus 6% iska matlab hai same time period mein wo appreciate hiya hai by 6% appreciation ka matlab hai ke aapki currency ki value increase kar gai hai depreciation ka matlab hai aapki currency ki value decrease kar gai hai aur in dono ko calculate kya se kata hai very easy ke aap jo bhi time period previous value divided by previous value multiplied by 100 karein aapko kitane percent se value of the currency appreciate hiya hai depreciate hiya hai hiya pata chal jaga depreciation will be in terms of a negative sign appreciation will be in terms of a positive sign aap jab kisi bhi country ki currency appreciate hiya hai yani ke uska value increase kajata hai aisa karne se kya hota hai ke jo uski market foreign market mein jo uski products wo expensive ho jaat aur jo foreign goods hiya us particular country ke ndar us wo cheap ho jaat hai aap hiya hume assume kana padega ki amare jo domestic prices hiya unko hume assume kya hai ke wo constant hai jab currency depreciate hiya to us kisi bhi mul ki currency depreciate hiya to us country ki international market mein bhejiwi products kis aap se sasti ho jaati hai jab ke jo uski apne mul ki ndar jab aap leke jaat hai foreign goods ko to wo onko expensive pay kani pati hai naturally kyunke unka value deteriorate hiya ho jaata hai aur aap ko zyada higher price pay kani pade hiya to aap ko foreign goods apne mulk mein expensive dekhne ko milti hai aur abhi aise ke situation mein agar aapki imports come hai aur aapke exports zyada hai to aapka jo currency hiya abhi to come hai agar value future mein increase kar jayega agar abhi wo agar value already come hai aur depreciate hiya aapki currency aur aapki exports na ho ne ke brabar hai aur aapki imports boh zyada hai to us context mein aapki currency ka value wo further niche chala jayega to these are the important dynamics that are linked up with the foreign exchange markets appreciation and depreciation