676:, the Arab oil embargo and a dock strike. After failing to secure a bail-out from the Americans or the French, a devaluation from US$ 2.80 to US$ 2.40 took effect on 18 November 1967. In a broadcast to the nation the following day, Wilson said, "Devaluation does not mean that the value of the pound in the pocket in the hands of the … British housewife … is cut correspondingly. It does not mean that the pound in the pocket is worth 14% less to us now than it was." This wording is often misquoted as "the pound in your pocket has not been devalued." Nevertheless the devaluation forced
504:(exports minus imports) by improving the competitiveness of domestic goods in foreign markets while making foreign goods less competitive in the domestic market by becoming more expensive. The combined effect will be to reduce or eliminate the previous net outflow of foreign currency reserves from the central bank, so if the devaluation has been to a great enough extent the new exchange rate will be maintainable without foreign currency reserves being depleted any further. However, the devaluation increases the prices of imported goods in the domestic economy, thereby fueling
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occurred after the real exchange rate has depreciated below the nominal rate. The reason for this is that speculators do not have perfect information; they sometimes find out that a country is low on foreign reserves well after the real exchange rate has fallen. In these circumstances, the currency value will fall very far very rapidly. This is what occurred during the
508:. This, in turn, increases the costs in the domestic economy, including demands for wage increases, all of which eventually flow into exported goods. These dilute the initial economic boost from the devaluation itself. Also, to combat inflation, the central bank would increase interest rates, hitting economic growth. A devaluation could also result in an
640:, who collectively recommended devaluation. Wilson was despatched with a letter from Attlee to tell Cripps of their decision, expecting that the Chancellor would object, which he did not. On 18 September 1949, the exchange rate was reduced from $ 4.03 to $ 2.80 and a series of supporting public expenditure cuts imposed soon afterwards.
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and purity of the precious metal. A government in need of money and short on precious metals might decrease the weight or purity of the coins without any announcement, or else decree that the new coins have equal value to the old, thus devaluing the currency. Later, with the issuing of paper currency
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came to power in 1964, the new administration inherited an economy in a more precarious state than expected with the estimated balance of payments deficit for the year amounting to £800 million, twice as high as Wilson had predicted during the election campaign. Wilson was opposed to devaluation, in
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There are significant economic consequences for the country that devalues its currency to address its economic problems. A devaluation in the exchange rate lowers the value of the domestic currency in relation to all other countries, most significantly with its major trading partners. It can assist
453:
will involve the central bank using its foreign exchange reserves to buy domestic currency, to prop up demand for the domestic currency and thus to prop up its value. However, this activity is limited by the amount of foreign currency reserves the central bank owns; the prospect of running out of
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present a theoretical model in which they state that the balance of payments crisis occurs when the real exchange rate (exchange rate adjusted for relative price differences between countries) is equal to the nominal exchange rate (the stated rate). In practice, the onset of crisis has typically
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and economic instability. In addition, a domestic devaluation merely shifts the economic problem to the country's major trading partners, which may take counter-measures to offset the impact on their economy arising out of a loss of trade income arising from the initial devaluation.
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more expensive, providing a disincentive for domestic consumers to purchase imported goods, leading to lower levels of imports (which can benefit domestic producers), but which reduces the real income of consumers. Devaluation tends to improve a country's
306:) maintains a fixed value of its currency by being ready to buy or sell foreign currency with the domestic currency at a stated rate; a devaluation is an indication that the monetary authority will buy and sell foreign currency at a lower rate.
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government, but also due to the fact that he had repeatedly asserted that Labour was not the party of devaluation. Devaluation was avoided by a combination of tariffs and raising $ 3bn from foreign central banks.
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was conditional upon progress towards sterling becoming fully convertible into US dollars, thereby aiding US trade. In July 1947, sterling became convertible but the resultant drain on the UK's
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433:). Again, a government short on gold or silver might devalue by decreeing a reduction in the currency's redemption value, reducing the value of everyone's holdings.
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Devaluation is most often used in a situation where a currency has a defined value relative to the baseline. Historically, early currencies were typically
321:, and not by government or central bank policy actions), a decrease in a currency's value relative to other major currency benchmarks is instead called
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these reserves and having to abandon this process may lead a central bank to devalue its currency in order to stop the foreign currency outflows.
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standing ready to purchase or sell domestic currency in exchange for foreign currency. Under fixed exchange rates, persistent capital outflows or
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669:. Wilson resisted and eventually pushed through a series of deflationary measures in lieu of devaluation including a 6 month wage freeze.
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In an open market, the perception that a devaluation is imminent may lead speculators to sell the currency in exchange for the country's
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made. The exchange rate reverted to its pre-convertibility level, a devaluation being avoided by the new
Chancellor of the Exchequer,
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461:, increasing pressure on the issuing country to make an actual devaluation. When speculators buy out all of the foreign reserves, a
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After a brief period in which the deflationary measures relieved sterling, pressure mounted again in 1967 as a consequence of the
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On
January 11, 1994, France decided to devaluate the CFA Franc in 14 African countries in Central Africa and West Africa.
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delegated a decision on how to respond to three young ministers whose jobs included economic portfolios, namely
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twice within two days by 1.9% and 1% in July 2015 in response to slowing economic growth, leading to the
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mounted again at a time when Cripps was seriously ill and recuperating in
Switzerland. Prime Minister
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Official lowering of the value of a country's currency within a fixed exchange-rate system
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By 1949, in part due to a dock strike, the pressure on UK reserves supporting the
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Fixed exchange rates are usually maintained by a combination of legally enforced
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Frieden, Jeffry A.; Stein, Ernesto; Bank, Inter-American
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in 2019. On 5 August 2019, China devalued its currency in response to the
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of US dollars was such that 7 weeks later, convertibility was suspended,
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1288:"China stuns financial markets by devaluing yuan for second day running"
1137:(Penguin paperback 1990 ed.). London: Michael Joseph. p. 333.
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of the national currency in relation to a foreign reference currency or
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392: in this section. Unsourced material may be challenged and removed.
1332:"Les 30 ans de la dévaluation du Franc CFA dans 14 pays francophones"
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1186:"BBC ON THIS DAY - 19 - 1967: Wilson defends 'pound in your pocket'"
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By 1966, pressure on sterling was intensifying, due in part to the
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imposition of trade tariffs by the United States against China
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to more easily compete in the foreign markets. It also makes
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The United States and China may be headed for a currency war
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The
Currency Game: Exchange Rate Politics in Latin America
327:; likewise, an increase in the currency's value is called
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at the rate of $ 4.03 with exchange controls restricting
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276:
is an official lowering of the value of a country's
1314:"Your guide to China's devaluation of its currency"
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313:system (in which exchange rates are determined by
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1264:"The Impact of China Devaluing the Yuan in 2015"
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1209:. London: Macmillan Education UK. p. 159.
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708:. Although the devaluation was welcomed by the
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648:When the Labour Government of Prime Minister
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993:. London: Richard Cohen Books. p. 235.
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1082:. London: Jonathan Cape. pp. 280–1.
706:2015–2016 Chinese stock market turbulence
408:Learn how and when to remove this message
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714:United States Department of the Treasury
613:, choking off consumption by increasing
582:volumes. This rate was confirmed by the
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1057:. London: Harper Collins. p. 350.
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336:Related but distinct concepts include
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390:adding citations to reliable sources
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354:, not a devaluation or revaluation.
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937:"Dollar Exchange Rate from 1940"
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175:Bretton Woods Conference
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319:foreign exchange market
159:Foreign exchange option
144:Non-deliverable forward
103:Foreign exchange market
1133:Healey, Denis (1989).
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149:Foreign exchange swap
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386:improve this article
82:Managed float regime
77:Linked exchange rate
52:Exchange rate regime
19:For other uses, see
1192:. 19 November 1967.
1135:The Time of my Life
805:Fixed exchange rate
748:Mexican peso crisis
727:India devalued the
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595:Anglo-American loan
566:At the outbreak of
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67:Fixed exchange rate
912:. IDB. p. 4.
589:After the war, US
574:was pegged to the
536:. You can help by
510:outflow of capital
344:goods and services
286:monetary authority
87:Dual exchange rate
1224:978-0-333-56081-5
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671:
667:George Brown
660:
647:
619:
588:
568:World War II
565:
542:
538:adding to it
533:
485:
467:Paul Krugman
456:
447:central bank
440:
419:
404:
398:October 2012
395:
384:Please help
379:verification
376:
337:
335:
330:appreciation
328:
324:depreciation
322:
308:
304:central bank
297:
273:
263:
185:Plaza Accord
991:Clem Attlee
825:Revaluation
686:Roy Jenkins
674:Six-Day War
638:Douglas Jay
299:revaluation
274:devaluation
268:and modern
1362:Categories
1298:2022-06-28
1273:2022-06-28
1249:2022-06-28
1144:0140153942
1064:0002151898
1000:1860661017
972:0333730577
946:14 October
837:References
795:Debasement
591:Lend-Lease
557:UK economy
545:March 2017
810:Inflation
800:Deflation
617:in 1947.
603:rationing
586:of 1944.
506:inflation
493:exporters
339:inflation
280:within a
989:(1997).
757:See also
702:renminbi
445:and the
278:currency
198:See also
129:Currency
863:Longman
497:imports
489:exports
95:Markets
1221:
1141:
1086:
1061:
997:
969:
916:
869:
655:Attlee
437:Causes
426:weight
121:Assets
615:taxes
422:coins
1219:ISBN
1139:ISBN
1084:ISBN
1059:ISBN
995:ISBN
967:ISBN
948:2018
914:ISBN
867:ISBN
696:The
636:and
469:and
272:, a
1211:doi
540:.
388:by
264:In
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1266:.
1241:.
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1125:^
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750:.
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632:,
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253:e
246:t
239:v
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