Devaluation of currency means a ________.

fall in exchange value of a country by market forces

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reduction in external value /exchange value of currency by the Government

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reduction in currency value due to wear and tear

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all the three

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Solution

The correct option is A reduction in external value /exchange value of currency by the Government
When the country follows a fixed exchange rate regime the government constantly has to revalue and devalue the currency in order to maintain the pegged exchange rate. When there is upwards market pressure on the currency to appreciate, the central bank will artificially devalue the currency by buying up foreign reserves.

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Similar questions

The authorised reduction in the value of a currency against other currencies is known as:

Q18. Consider the following statements:

1. In the floating exchange rates, currency values are determined by central bank.

2. Currency depreciation is usually done by a nation’s central bank.

Which of the above statements are correct?

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