Currency appreciation vs depreciation

CFA Level III
#1

Sorry for the tenth question on currency appreciation vs depreciation.

So from reading similar questions, I understand that given a convention of X/Y, Y is the base currency. If X/Y appreciates, and if X/Y is say 1.2, after appreciation it will be 1.25.

How does this not apply to USD/JPY.

USD/JPY from January 2016 was ~120

USD/JPY now is ~110.

Given the convention as described above, JPY would be the base currency. Since USD/JPY went from 120 to 110, it would mean that the base currency i.e JPY depreciated.

But JPY has actually appreciated.

What gives? Am I going crazy after reading for 5 hours?

Thank you very much for you answer(s)!

#2

You inverted the ratios. The values you gave are actually for JPY/USD, where USD is base currency. To convert it to JPY as base you need to take reciprocals:

USD/JPY = (1/120) = 0.0083

USD/JPY = (1/110) = 0.0091

P.S. I guess study takes a toll

#3

When I googled USD/JPY today, it gave me 110.36

#4

This is special thing with USD/JPY exchange rate, it is quoted in JPY not in USD as other rates, so you have to take reciprocal to get rate in USD.

#5

the CFA convention is different from the commonly used version

#6

Perfect, thanks!

I guess CFAI does it a little bit different than every investing site? After looking into it, I noticed the same thing for EUR/USD.

EUR/USD was ~1.06 December 2014.

Today EUR/USD is ~ 1.11.

According to CFAI convention, you would think that USD got stronger/appreciated (EUR got weaker/depreciated). But in reality, EUR has become stronger/appreciated (USD got weaker/depreciated).

I just want to make sure that I’ll get answers right on the exam with the thinking I described in original post. I don’t care how financial websites quote FX.