Pro and counter cyclicality of currencies – insights on depreciation

Doing badly: Australian dollar banknotes of various denominations. The currency is among commodity-based currencies that are also faring badly.

IN business cycle theory and finance, any economic quantity that is positively correlated with the overall state of the economy is said to be pro-cyclical. That is, any quantity that tends to increase when the overall economy is growing is classified as pro-cyclical.

Quantities that tend to increase when the overall economy is slowing down are classified as countercyclical.