Devalued

Devalued is the adjective form of devalue, meaning that something has had its value reduced. In economics, it most often refers to a currency whose official value has been lowered relative to other currencies. The term is commonly associated with fixed or semi-fixed exchange rate systems, where a government or central bank can adjust the nominal value of its currency downward. In a floating exchange-rate regime, movements in a currency’s value are usually described as depreciation rather than devaluation, though popular usage sometimes uses devalued to describe a fall in value regardless of policy.

Devaluation and depreciation describe different processes. Devaluation is an intentional policy action within a fixed or managed exchange-rate framework. Depreciation is the market-driven decline of a currency’s value in a flexible regime. The distinction matters for how authorities respond and how the public interprets the change, including considerations of credibility, monetary policy, and the balance of trade.

Economic effects of devaluation are mixed and context-dependent. Short-term benefits can include improved export competitiveness and a larger trade surplus, while costs may include higher import prices, rising inflation, and pressure on foreign-denominated debt. The overall impact depends on the economy’s price flexibility, monetary stance, and the response of trading partners.

See also: depreciation, exchange rate, currency crisis, inflation, monetary policy. Examples of devaluations have occurred during financial crises in various regions, such as the Mexican peso crisis of 1994 and the Asian financial crisis of 1997.