Revaluation
Topic: Balance of Payments and Exchange Rates · NCERT: Class 12, Ch 6 "Open Economy Macroeconomics"
Meaning
Revaluation is a government decision, under a fixed exchange rate system, to raise the official value of the home currency. In terms of a direct quote such as ₹ per $, the government lowers the exchange rate. Each rupee now buys more foreign currency. Revaluation makes imports cheaper and exports dearer for foreigners. So it tends to reduce a trade surplus. It is the opposite of devaluation.
Example
Suppose India fixed its rate at ₹70 per dollar and then officially reset it to ₹60 per dollar. That is a revaluation of the rupee. An Indian importer now pays only ₹60 for a dollar's worth of goods, but an American buyer needs more dollars to buy ₹600 of Indian goods.
Don't confuse with
- Appreciation: the same rise in the rupee's value, but caused by market forces under a flexible rate, not by a government decision.
- Devaluation: the government raises the ₹/$ rate, making the rupee cheaper.
Related concepts
- Fixed exchange rate
- Devaluation
- Black market for foreign exchange
- Speculative attack
- Managed floating
- Forex intervention
- Crawling peg
- Currency board
- Impossible trinity
- Competitive devaluation