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Banking Term: Currency Devaluation

Jun 10, 2015 16:48 IST

    Devaluation is a process in which the government intentionally declares its own currency cheaper in term of foreign currency.

    Devaluation is a process in which the government intentionally declares its own currency cheaper in term of foreign currency. In other words, it is reduction in the external value of a currency.

    It is a monetary policy tool of countries that have a fixed exchange rate or semi-fixed exchange rate. It is often confused with depreciation, and is in contrast to revaluation.

    In other words, a currency is considered devalued when it loses value relative to other currencies in the foreign exchange market. A currency's devaluation is the result of a nation's monetary policy.

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