Glossary · Money and central banks
Currency devaluation
Devaluation is when a currency is made, or allowed, to lose value against other currencies, so it buys less abroad.
Also called: devaluation, depreciation, currency crash, weak currency
Turkish lira, to Nov 2026, of 14 currencies
End of 1998; 6.2 at the end of July
In plain words
Say 1 dollar buys 10 pesos. One morning the government announces that from now on a dollar buys 15. Overnight everything from abroad costs the country’s people 50% more in pesos, while their own goods got a third cheaper for foreigners. That is a currency devaluation.
Strictly, a devaluation is a decision by a government or central bank that fixes its exchange rate: it resets the fixed rate lower. When a floating currency simply falls in the market, economists call it depreciation. In everyday talk both are called devaluation.
Countries devalue to make their exports cheaper and imports dearer, to shrink a trade deficit, or because they can no longer defend the old rate as their reserves run out. The cost lands on their own people, whose wages and savings buy less of anything imported.
Example
Who wins and who loses when the peso goes from 10 to 15 per dollar
- A family buying a $300 imported phone: it cost 3,000 pesos, now 4,500.
- A coffee farmer selling a sack abroad for $100: it brought 1,000 pesos, now 1,500.
- A company that borrowed $1 million: its debt was 10 million pesos, now 15 million, with the same peso income.
- Savers with pesos in the bank: their money buys a third less of anything priced in dollars.
Exporters win; importers, dollar borrowers and savers lose. That is why devaluations are rarely popular at home.
One level deeper
History is full of them. Britain devalued the pound in 1949 and 1967, and was forced out of Europe’s exchange rate system on “Black Wednesday” in September 1992. Russia let the ruble go in August 1998: it went from 6.2 to 20.6 rubles per dollar by the end of the year, losing 70% of its value. Argentina ended its one-peso-one-dollar peg in 2002, and China lowered its yuan fixing in August 2015.
A devaluation helps only if prices at home do not simply rise to match it. If wages and prices chase the currency down, exports gain nothing and the result is inflation, sometimes a spiral, as in many hyperinflations. If the country owes a lot in dollars, a falling currency can bankrupt its companies and even its government, as in parts of Asia in 1997–98.
When several countries push their currencies down at once to grab exports from each other, it is called a currency war, or “beggar-thy-neighbor” policy. The devaluations of the 1930s are the classic case, and one reason the post-war Bretton Woods system fixed exchange rates.
Currencies against the dollar since 2010
What each currency is worth in dollars now, if January 2010 = 100. Below 100 it lost value against the dollar; above 100 it gained.
The Turkish lira lost 97% of its dollar value (to Nov 2026); the Swiss franc gained 26%.
The numbers behind the chart
| Value | |
|---|---|
| Swiss franc | 126 |
| Chinese yuan | 102 |
| Korean won | 85 |
| British pound | 83 |
| Euro | 78 |
| Australian dollar | 76 |
| Canadian dollar | 74 |
| Mexican peso | 69 |
| Japanese yen | 58 |
| Indian rupee | 49 |
| South African rand | 45 |
| Russian ruble | 36 |
| Brazilian real | 32 |
| Turkish lira | 3 |
Why it matters
A devaluation instantly changes what people can afford: imported food, fuel, medicine and phones get dearer.
It can help an economy stuck with a currency that is too dear, by making its goods competitive again.
For investors, currency moves can wipe out returns: a stock market that doubles in local money while the currency halves has gained nothing in dollars.
A common mistake
Myth: Devaluing the currency makes a country richer, because it sells more abroad.
In fact: It shifts income from consumers and savers to exporters; by itself it does not create wealth. The boost to exports lasts only if wages and prices at home do not catch up, and imports, foreign debts and inflation all get worse.
Questions people ask
What is the difference between devaluation and depreciation?
Devaluation is an official decision to lower a fixed exchange rate. Depreciation is a fall in a floating currency’s market price. The effects on prices and trade are similar.
What happens to prices when a currency is devalued?
Imported goods get dearer at once, and over time many local prices follow, since businesses use imported materials and fuel. How much of it shows up in inflation depends on how much the country imports and how much people trust its central bank.
Which currency has lost the most against the dollar?
Over long periods, the currencies of countries with very high inflation. Of the 14 currencies in our chart, the Turkish lira lost the most since January 2010: 97% of its dollar value. In hyperinflations, such as Zimbabwe’s or Venezuela’s, currencies lost practically all of their value.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Euro foreign exchange reference rates: European Central Bank, euro foreign exchange reference rates, time series file eurofxref-hist.zip.
- US dollar, Bank of Russia official rate: Bank of Russia (Central Bank of the Russian Federation), official exchange rate of the ruble against the USD, currency code R01235 (XML_dynamic.asp service).
- This page explains a term. It is not investment advice.