devaluation
noun
, -yü-ˈā-\
Definition of devaluation
Examples of devaluation in a Sentence
Recent Examples on the Web
Any stimulus that a central bank can eke out of devaluation comes at a direct expense to its trading partners, and is likely to be short-lived before other countries cut rates or buy bonds to compete. — Karl Russell, BostonGlobe.com, "As recession concerns mount, dozens of central banks are cutting rates," 15 Aug. 2019 What's insane about all this is that further tariffs and especially competitive currency devaluations won't benefit either economy. — Fortune, "The Week Trump and Xi Learned to Stop Worrying and Love the Trade War—CEO Daily," 10 Aug. 2019 Upon its exit from the CFA zone in 1962, the country conducted an expansionist monetary policy, leading to the devaluation of the Malian Franc in 1967, followed by a coup d’État the following year. — Cheikh Ahmed Bamba Diagne, Quartz Africa, "How Francophone Africa’s France-backed CFA franc works and why it’s controversial," 2 Aug. 2019 The most famous frenzy of competitive devaluations came during the Great Depression of the 1930s, as countries abandoned the gold standard that had pegged their currencies to the value of the metal. — Washington Post, "Currency Wars," 14 Apr. 2015 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. 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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