When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves. A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation.

Is the dollar going to be devalued?

The collapse of the dollar remains highly unlikely. Of the preconditions necessary to force a collapse, only the prospect of higher inflation appears reasonable. Foreign exporters such as China and Japan do not want a dollar collapse because the United States is too important a customer.

What happens when currency is devalued?

Devaluation reduces the cost of a country's exports, rendering them more competitive in the global market, which, in turn, increases the cost of imports. ... In short, a country that devalues its currency can reduce its deficit because there is greater demand for cheaper exports.