DEVALUATION VS DEPRECIATION

DEVALUATION (REVALUATION) VS DEPRECIATION (APPRECIATION)

• Devaluation is a deliberate downward adjustment in the value of a country's currency relative to another currency, group of currencies or standard. It is a monetary policy tool used by countries that have a fixed exchange rate or nearly fixed exchange rate regime and involves a discrete official reduction in the otherwise fixed par value of a currency.
•  The monetary authority formally sets a new fixed rate with respect to a foreign reference currency or currency basket. In contrast, depreciation is a decrease in a currency's value (relative to other major currency benchmarks) due to market forces under a floating exchange rate and not due to any government or central bank policy actions.
• Revaluation is the opposite of devaluation and the term refers to a discrete raising of the otherwise fixed par value of a nation’s currency. Appreciation, on the other hand, is a increase in a currency's value (relative to other major currencies) due to market forces under a floating exchange rate and not due to any government or central bank policy interventions.