Exchange Rate Question

[keep_running]

Current Canadian Dollar to Japanese Yen Exchange Rate: JPY/CAD 75
New Exchange Rate: JPY/CAD 78,
They say the answer is that CAD has appreciated by 4.0% while the JPY has depreciated by 3.8%.
I feel like that JPY has appreciated in this scenario, because it would take more CAD to buy JPY.
Am I missing something?

 

[S2000magician]

You’re reading the quote incorrectly.
JPY/CAD 75 means that it takes JPY75 to buy CAD1.0. JPY/CAD 78 means that it takes JPY78 to buy CAD1.0.
As the price of CAD1.0 has increased, CAD has appreciated (relative to JPY) and JPY has depreciated (relative to CAD).

 

[sonuvga]

keep_running wrote:
“I feel like that JPY has appreciated in this scenario, because it would take more CAD to buy JPY.”

when you are paying more, then your purchasing power has decreased, thus its not appreciated, its depreciated i.e. now you have to shell out 78 units to get 1 unit as compared to shelling out 75 units for 1 unit earlier.
As well, “They say the answer is that CAD has appreciated by 4.0% while the JPY has depreciated by 3.8%.” is w.r.t the particular currency, thus % is different, i.e. 78-75/75 (4%) and 78-75/78 (3.8%).

 

[S2000magician]

sonuvga wrote78-75)/75 (4%) and (75-78)/78 (−3.8%).

Adding parentheses makes this clearer. And the second one is negative.

 

[Sesshy]

Look at this.
http://www.analystforum.com/forums/cfa-forums/cfa-general-discussion/913...
As someone involved in the market, I am rather disturbed by how currency quotation is taught academically.

 

[eighty]

S2000 magician is correct. Even if you look generally at Yens, they are always a bigger number when quoted in currency because of denomination issue (like 60 or 100 Yen to a Western country’s currency).