What does currency devaluation mean?

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What does currency devaluation mean?




L'ANTISECHE - Politics, sport, geography, science, history ... Every day, we wonder about an essential concept to understand current events, even if it is a question that we do not necessarily dare to ask ... Find our cheat sheet every evening in our newsletter the Journal of tomorrow. What does currency devaluation mean?


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L’ANTISECHE – Politics, sport, geography, science, history … Every day, we wonder about an essential concept to understand current events, even if it is a question that we do not necessarily dare to ask … Find our cheat sheet every evening in our newsletter the Journal of tomorrow. What does currency devaluation mean?


It is a state inherent in the life of coins. Because, according to events, or political decisions, their value can fluctuate. Take the Argentine peso. It has been losing value against the dollar, the world’s benchmark currency, for years. A nothing weakens him. In 2019, the setback of incumbent Liberal President Mauricio Macri in the primary elections was enough to make Argentina’s currency tumble 18.76% against the greenback. More recently, the question arises for many economies, due to the health crisis in coronavirus.

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  • The value of a currency can fall due to its treatment in the foreign exchange market. This is called depreciation. Different causes are possible: recession, trade deficit or issuance of money by the Central Bank.
  • A currency also experiences a devaluation when the monetary authorities decide to lower its exchange rate compared to a reference (a foreign currency such as the dollar, for example). The last in France dates back to 1983, at the time of the franc.

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When a devaluation is chosen, it is said to be “competitive” because it operates like a weapon. Example: the devaluation of the yuan (more than 7 yuan to the dollar) decided on August 5, 2019 by Beijing. By letting their currency slip, the Chinese have sought to support their exports and mitigate the impact of US tariffs.

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