So one would normally think that when the US dollar marginally depreciates relative to another currency, say the Ghanaian cedi, that the cedi would appreciate in response. However, look at this Khan Academy definition of R.E.R. (in the formula posted below). Here if US CPI is higher relative to Ghana's CPI, the dollar appreciates relative to the cedi when US inflation just increased. The way I understand it is that now with the higher US inflation, it now takes more cedis to purchase the same amount of US dollars as before. However, I'm not sure how to reconcile the two definitions. Does inflation in USD, all else held equal, cause the USD to depreciate or appreciate in relation to the cedi?
R.E.R. of USD = (other currency per dollar) x ((Price Level of US)/(Price Level of Other Country))
