The reduction of a currency´s value in relation to other currencies. The exchange values of freely traded currencies are determined by market action. However, governments that interfere with market action can manipulate the value of their currency by fiat. Devaluation tends to reduce domestic demand for imports in a country by rising prices in terms of the devalued currency and to raise foreign demand for the country´s exports by reducing their prices in terms of foreign currencies. Devaluation can therefore help to correct a balance of payments deficit and sometimes provide a short-term basis for economic adjustment of a national economy.

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