devaluation

noun de·val·u·a·tion \ (ˌ)dē-ˌval-yə-ˈwā-shən , -yü-ˈā- \

|Updated on: 10 Jun 2018

Definition of devaluation

1 : an official reduction in the exchange value of a currency by a lowering of its gold equivalency or its value relative to another currency

2 : a lessening especially of status or stature : decline

Recent Examples of devaluation from the Web

The lack of female Nobelists sends a powerful message of devaluation to aspiring female STEM professionals.

— brian keating, WIRED, "There's Nothing Noble about Science’s Nobel Prize Gender Gap," 27 May 2018
Critics say Petro’s policies would cause inflation and a devaluation of the peso.

— christina austin, Fortune, "Why You Should Care About Colombia's Presidential Election This Weekend," 24 May 2018
The rial experienced several waves of devaluation, including during the last ramp-up in U.S. sanctions.

— mark dubowitz and richard goldberg, WSJ, "Iran, Get Ready for the Battle Rial," 21 May 2018
Many Argentines still blame the IMF for permissive and heavy lending that led to devaluation of the peso and the debt default.

— luis andres henao, Fox News, "Argentines haunted by memories of crisis oppose IMF's help," 11 May 2018
China may respond by selling U.S. Treasuries, currency devaluation, or seeking a rare earth ban.

— felice maranz, Bloomberg.com, "Wall Street Analysts Can't Agree If the Trade War Threat Is Real," 6 Apr. 2018
The ruble lost half its value, and, despite a muted recovery in oil and a boost to industry from the devaluation, Russia’s economy is set to shrink by 2.7 percent this year, according to a World Bank report.

— Newsweek, "Russia's Ukrainian Retreat," 8 June 2015
Tough tech stock market The other likely reason for the devaluation is simply that tech stocks are generally down this year.

— david meyer, Fortune, "Smartphone Firm Xiaomi Has Reportedly Trimmed the Valuation for Its Massive IPO. Here's Why," 8 May 2018
That is the opposite of a currency devaluation game.

— neil irwin, BostonGlobe.com, "Should Trump be annoyed about Russian, Chinese currencies?," 17 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'devaluation.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of devaluation

1914

in the meaning defined at sense 1

See Words from the same year

NEW! Time Traveler

Financial Definition of DEVALUATION

devaluation

noun

What It Is

Devaluation refers to a decrease in a currency's value with respect to other currencies.

How It Works

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.

A central bank can make the conscious effort to make its currency less valuable. If Country XYZ's currency is set at a fixed exchange rate of 2:1 to the U.S. dollar and, due to a weak economy, XYZ cannot afford to pay the interest rate on its debt outstanding, XYZ may devalue their currency. This means the central bank of XYZ will declare their fixed exchange rate to be 10:1 to the U.S. dollar. This makes their debt outstanding is now worth five times less. It's a very tricky maneuver with grave economic consequences.

Why It Matters

Whether deliberate or as a result of market climate, currency devaluation reduces the price of a country's domestic output. This has the potential to benefit the economy by helping to increase its export volume. Conversely, import volumes become stifled as the price of foreign-produced goods and services increases dramatically.

The opposite of devaluation is known as revaluation.

For a more thorough explanation of currency devaluation, how China manipulates its currency worth and the economic impact following Argentina's devaluation, please read this educational article: How Money Manipulation on the Other Side of the World Could Affect American Portfolios

Source: Investing Answers