Differentiate between devaluation/revaluation of a currency and
appreciation of a currency.
Devaluation vs Revaluation
Devaluation is the purposeful reduction of the value of the domestic currency in comparison with the currency of other countries. Devaluation of currency is done by the countries which are deciding the value of the currency with respect to foreign currencies. In order to maintain the exchange rate, the central bank reduces the value of the currency, and it is called the devaluation of the currency. This method is used when the country is following a fixed exchange rate system.
Revaluation of currency is the opposite of devaluation and is an upward adjustment of the exchange rate of the country in relation to the price of gold or any foreign currency. Revaluation of currency is followed by countries using a fixed exchange rate system.
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