In the context of currency value, what does appreciation refer to?

Appreciation in the context of currency refers to an increase in the value of a currency relative to other currencies. This can occur due to various economic factors such as higher interest rates, strong economic growth, or increased foreign demand for a country's goods and services. When a currency appreciates, it means that it can buy more of a foreign currency than it could previously. This increase in value also affects international trade, making exports more expensive and imports cheaper.

Understanding appreciation is crucial as it has significant implications for a country's economy, influencing everything from inflation rates to foreign investment flows. The other potential answers relate to depreciation, stability, and volatility, which do not accurately convey the concept of appreciation.