devaluation
noun
-yü-ˈā-\
Definition of devaluation
Examples of devaluation in a Sentence
Recent Examples on the Web
Pena Nieto presided over a devaluation of almost 50 percent in the Mexican peso, and the economy grew by an anemic average of 2.1 percent annually in his first five years in office. — Mark Stevenson, The Seattle Times, "Mexican president blames state, local police for crime surge," 3 Sep. 2018 But ever since the devaluation of its currency, in early 2002, my trips to its capital, Buenos Aires, have been highly focused, die-hard shopping missions. — Suzy Buckley, Town & Country, "Buy for Me, Argentina," 14 Jan. 2013 The People’s Bank of China, for its part, vowed over the weekend to refrain from any competitive devaluations of its currency. — Josh Zumbrun, WSJ, "U.S. Criticizes China’s Currency Practices, but Doesn’t Add Manipulator Designation," 18 Oct. 2018 Macri also dropped the previous government's foreign exchange controls, ushering in the sharp devaluation of the peso. — Almudena Calatrava, Fox News, "Argentines seek soup kitchens, barter markets amid crisis," 10 Sep. 2018 The two countries are also working on a related agreement on currency manipulation aimed at securing Seoul’s commitment to avoid competitive devaluations of its currency. — Bloomberg.com, "U.S. Pushes for Quick Nafta Agreement But Canada Needs Details," 29 Mar. 2018 Both Spain and Italy had a history of high inflation and currency devaluation to keep their exports competitive, which forced them to pay more to borrow. — Greg Ip, WSJ, "Why Italy Is Flirting with Euro Exit and Spain Isn’t," 3 June 2018 The specter of capital flight started to emerge late last year, following the central bank’s surprise devaluation of the yuan in August 2015. — Nathaniel Taplin, WSJ, "Has the Big Yuan Short Finally Arrived?," 26 June 2018 While currency devaluations such as this are sometimes tied to issues such as a trade imbalance or slumping oil prices, Iran's non-oil imports in 2017 were $47 billion, with oil sales at $55 billion, leaving a currency surplus of $17 billion. — Sean Savage, Jewish Journal, "Iran's plummeting currency reflects country's economic, military concerns," 17 Apr. 2018These 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.
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More Definitions for devaluation
devaluation
nounFinancial Definition of devaluation
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
devaluation
noun
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Legal Definition of devaluation
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