What is currency devaluation? What happens when a currency loses value
By SendPay Business · · 2 min read
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Currency devaluation is when a government or central bank deliberately lowers the value of its currency against others. It usually happens where a currency is pegged or managed rather than left to float freely.
Devaluation vs depreciation
Devaluation is an official decision to lower a fixed or managed exchange rate. Depreciation is when a floating currency falls because of the market. The effect on prices is similar, but the cause is different. For example, the UK devalued the pound in 1967, cutting its fixed rate from 2.80 to 2.40 US dollars.
Why countries devalue
A cheaper currency makes a country's exports cheaper abroad and imports more expensive at home, which can help reduce a trade deficit. It can also be forced when a country runs low on the foreign reserves it needs to defend a fixed rate.
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What it means for people and businesses
- Imported goods and foreign travel get more expensive.
- Exporters may sell more because their prices fall abroad.
- Debts owed in foreign currency become harder to repay.
- Savings held in the local currency buy less abroad.
Where SendPay fits
SendPay platforms give your customers GBP, EUR and USD accounts with currency exchange under your own brand, powered by licensed partners. SendPay does not offer hedging contracts. SendPay tells you in writing which licences apply to your platform before you launch.
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Questions people ask
How much more will imports cost?
Our free devaluation calculator shows the change in import prices, savings abroad and foreign currency debts.
Devaluation calculator →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.