Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency's value; in contrast, a revaluation is an upward change in the currency's value. ... To devalue, it might announce that from now on 20 of its currency units will be equal to one dollar.

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.

How does a currency devalue?

Devaluation occurs when a government wishes to increase its balance of trade (exports minus imports) by decreasing the relative value of its currency. ... By making its own currency cheaper, the country can boost exports. At the same time, foreign products become more expensive, so imports fall.