Devaluation of Currency
The Currency devaluation is the deliberate reduction in the value of a country’s currency against another currency.
It is used by monetary authorities when they need to improve the country’s trade balance by increasing exports if and when the trade deficit becomes a problem for the economy.
The monetary authority then sets a lower exchange rate for the national currency in relation to a foreign reference currency or currency basket.
Why is a currency devaluated?
- A national economy may decide to devalue their currency by its own will.
- This is significantly different from depreciation as it is not linked to non-governmental activities or market factors.
- One reason why a country may devalue its currency is to reduce the trade imbalance encountered in import-exports. Devaluing a currency reduces the cost of a country’s exports which makes them more competitive in the international market.
- It also increases the cost of imports as now the domestic currency is worth-less so the domestic consumers are less inclined to purchase them which further strengthens the domestic businesses.
- This causes the exports of a country to increase and imports to decrease which in turn favor an improved balance of payments by the reduction of trade deficits.
What is Currency Chest?
Currency Chests are places where RBI (Reserve Bank of India) stocks money meant for banks and ATMs. ...
Impact of EU-UK Brexit Deal in India
India is to emerge as the net-gainer from the Brexit deal recently signed between the European Union...
The United States has again included India in its monitoring list of countries. These countries are ...
Defence Canteens ban import of finished goods
The Government controlled Canteen Stores Department that operates canteens of defence forces are to ...
MECL begins gold mining in Kolar after 16 years
The Mineral Exploration Corporation Limited recently began the Kolar Gold Field exploration after 16...
Category: Economy & Banking Current Affairs
|View All E-Books: Recent Release|