Currency Devaluation
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A Currency Devaluation is a drop in relative currency value of some currency.
- Context:
- It can range from being a Fixed-Rate Currency Devaluation to being a Open-Market Currency Depreciation.
- It can range from being a Rapid Currency Devaluation to being a Protracted Currency Devaluation.
- It can lead speculators to sell the Currency in exchange for the country's foreign reserves,
- It can lead to a Balance of Payments Crisis.
- …
- Counter-Example(s):
- See: Monetary Policy, Currency Exchange Rate, Foreign Exchange Market, Central Bank, Inflation, Purchasing Power, Redenomination.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/devaluation Retrieved:2014-3-13.
- 'Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, depreciation is used to describe a decrease in a currency's value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions. Under the second system central banks maintain the rates up or down by buying or selling foreign currency, usually but not always USD.
The opposite of devaluation is called revaluation.
Depreciation and devaluation are sometimes incorrectly used interchangeably, but they always refer to values in terms of other currencies. Inflation, on the other hand, refers to the value of the currency in goods and services (related to its purchasing power). Altering the face value of a currency without reducing its exchange rate is a redenomination, not a devaluation or revaluation.
- 'Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, depreciation is used to describe a decrease in a currency's value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions. Under the second system central banks maintain the rates up or down by buying or selling foreign currency, usually but not always USD.