Devaluation is a deliberate decision by a government or central bank to reduce the value of its own currency in relation to the currencies of other countries.
Governments often opt for devaluation when there is a large current account deficit, which may occur when a country is importing far more than it is exporting.
When a nation devalues its currency, the goods it imports and the overseas debts it must repay become more expensive. But its exports become less expensive for overseas buyers. These competitive prices often stimulate higher sales and help to reduce the deficit.
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