What is Dipriciation?

Answer 1

Depreciation can be defined in several ways according to the context it is used. Depreciation in an accounting context refers to the reduction in the value of an asset. This reduction is usually the result of wear and tear on assets as time passes. (Think of a car. A car losses its value as it ages as the mileage goes up). Depreciation in this context can be used to revalue the asset and allocate the loss of value as an expense. There are different ways to calculate depreciation such as the straight line method, the accelerated method, etc, but fundamentally the same concept of assigning the cost of the asset over its useful life applies.

In another context, that of currency trading, depreciation refers to the loss of value of one currency relative to the other.Currencies are traded in pairs. (e.g.: EUR/USD) so if the parity (conversion rate) on EURUSD goes up, the USD loses strength or depreciates against the EUR.