Devaluation – What is Devaluation in forex?

What is Devaluation?

Definition of Devaluation: This is defined as a substantial fall in the cost of a currency, related to the cost of silver or gold or the fall of the exchange rate, which is generally declared by the bank of that particular nation. Devaluation takes place for permanent currencies or for the currency that is hooked to the other nation. Governments generally devalue their own money for making the exports less costly in the foreign exchange markets. Moreover, the cost of the import rises, thus discouraging their utility, therefore resulting in a decrease in the balance of payments. On the other hand, the devaluations of the currency may also take place to lessen the inflationary forces caused by the hooking as long as the exporters also lessen the domestic costs for their exported products.