What is currency revaluation?


Quick Answer

Currency revaluation refers to a calculated upward adjustment to a nation's exchange rate relative to its chosen baseline. The process is undertaken by nations with fixed exchange rates to deliberately increase the value of its own currency relative to a single currency, a basket of international currencies or whatever the underlying baseline may be.

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What is currency revaluation?
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Full Answer

Currency revaluation only occurs in fixed currencies, meaning the currency is pegged to a foreign currency, a basket of foreign currencies or a different quantitative benchmark. The process may only be undertaken by the underlying nation's government or policymakers. The act of altering the value of a nation's currency relative to other currencies is typically influenced by market pressures.

A government typically revalues its currency when it wishes to increase the value of its currency relative to its benchmark currency. This maneuver would officially increase the purchasing power of the nation's residents, while decreasing the price of imports.

Revaluation is the inverse of devaluation, which is the official lowering of the value of a nation's currency within a fixed exchange rate. Under this measure, the underlying government establishes a new fixed rate respective to the benchmark.

The International Monetary Fund encourages governments and policymakers to refrain from manipulating exchange rates to gain unfair competitive advantages over foreign currencies.

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