What term describes an increase in a currency's value relative to another currency?

The term that describes an increase in a currency's value relative to another currency is currency appreciation. When a currency appreciates, it means that it has gained strength compared to another currency, allowing it to buy more of that other currency. This often occurs due to various factors such as increased demand for the currency, higher interest rates, or overall economic stability that attracts foreign investment.

Understanding currency appreciation is essential for evaluating exchange rates and international financial transactions, as it impacts trade balances, investment flows, and overall economic health. In international markets, an appreciating currency can make exports more expensive and imports cheaper, influencing a country's trade dynamics. This makes the concept of currency appreciation a fundamental aspect of foreign exchange economics.