Devaluation

Definition

Devaluation is the deliberate reduction in the value of a country's currency relative to another currency, group of currencies, or standard. This action is usually taken by the government or central bank to help correct trade imbalances.

Related terms

Exchange Rate:

The rate at which one currency can be exchanged for another currency, which can fluctuate due to market conditions and policy decisions.

Trade Balance: The difference between a country's exports and imports; a positive balance means a country exports more than it imports, while a negative balance indicates more imports than exports.

Inflation:

The general increase in prices and fall in the purchasing value of money; devaluation can sometimes lead to inflation if it increases the cost of imported goods and services