devaluation investment & finance definition

A reduction in the value of one currency in relation to other currencies. For example, when Mexico devalued the peso, more pesos were required to obtain a given amount of a foreign currency. Devaluation is generally undertaken by a government in order to make its country's products more competitive in world markets. Devaluation can significantly reduce the value of investments held by foreign investors in the devaluing country. In the case of the peso devaluation, U.S. investors who held high-interest peso accounts in Mexican banks found their account balances worth very little in terms of U.S. dollars.