Currency Devaluation
A deliberate downward adjustment of a currency's value relative to other currencies.
What is Currency Devaluation?
Currency devaluation is an intentional reduction in the official value of a country's currency relative to foreign currencies, carried out by the government or central bank. It is distinct from currency depreciation, which refers to a market-driven decline in value. Devaluation typically makes a country's exports cheaper and more competitive in global markets while making imports more expensive, potentially boosting domestic manufacturing and reducing trade deficits. However, it can also spark inflation (as import costs rise), erode household purchasing power, and trigger competitive devaluations by other countries — sometimes called a 'currency war'.
Example
In August 2015, China's central bank (PBOC) devalued the renminbi by approximately 2% in a single day, its largest single-day devaluation in decades. The move was intended to make Chinese exports more competitive and to align the currency closer to market rates, but it triggered global stock market volatility and concerns about a broader economic slowdown.
Source: Federal Reserve Bank of San Francisco — China's Exchange Rate Policy