de·​val·​u·​a·​tion | \ (ˌ)dē-ˌval-yə-ˈwā-shən How to pronounce devaluation (audio) , -yü-ˈā-\

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

Examples of devaluation in a Sentence

Recent Examples on the Web

In the absence of a co-ordinated adjustment to exchange rates and a peaceful end to trade hostilities, the world could stumble into a cycle of competitive devaluations and tariff rises. The Economist, "What comes after Bretton Woods II?," 15 Aug. 2019 And any benefit devaluation might confer to China's exporters would be more than offset by increasing costs for Chinese imports, especially in the two biggest product categories: semiconductors and oil. Fortune, "The Week Trump and Xi Learned to Stop Worrying and Love the Trade War—CEO Daily," 10 Aug. 2019 For those reasons, devaluations make investors nervous. New York Times, "China’s Currency Moves Escalate Trade War, Rattling Markets," 5 Aug. 2019 That sounds about right, since the fund has a record of preferring devaluation to sound money. Mary Anastasia O’grady, WSJ, "Argentina’s Monetary Rescue," 16 Dec. 2018 China is said to be studying yuan devaluation as a tool in the U.S. trade spat. Christine Harvey,, "Everything You Need to Know This Morning From Daybreak (Podcast)," 9 Apr. 2018 That means the fundamentals don’t justify an excessive devaluation of the currency, said Yu Yongding, a former central bank adviser and member of Chinese Economists 50 Forum, a think tank that advises policy makers. Daniel Kruger, WSJ, "Global Central Bank Shift Eases Drag on Chinese Currency," 22 June 2019 At the same time, there are growing concerns that the Lebanese currency, the lira, is at risk of devaluation. Jane Ferguson, The New Yorker, "Why Lebanon’s People Are Turning on Their Politicians," 12 July 2019 But the original Zimbabwe dollar was abandoned in 2009 after years of economic upheaval, currency devaluation and devastating hyperinflation. Chris Muronzi, Quartz Africa, "The Zimbabwean dollar makes a return a decade later but uncertainty reigns," 26 June 2019

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.

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First Known Use of devaluation

1914, in the meaning defined at sense 1

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19 Aug 2019

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The first known use of devaluation was in 1914

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Financial 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


de·​val·​u·​ation | \ (ˌ)dē-ˌval-yə-ˈwā-shən How to pronounce devaluation (audio) \

Legal 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 of the value of something (as an asset) portfolio devaluation

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