Devaluation is officially lowering the exchange value of (a currency) by lowering its gold equivalency. By doing this, country's exports become relatively inexpensive for foreigners and foreign products become relatively more expensive for domestic consumers, thereby discouraging imports. This in turn may help to reduce a country's trade deficit.
The fixed exchange rate or pegged exchange rate is a term used when a country's government or central bank ties the official exchange rate to another country's currency (or the price of gold). A set price is determined against a major world currency (usually the U.S. dollar, but also other major currencies such as the euro or the yen). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged. The private market through supply and demand determines a floating exchange rate. Any differences in supply and demand will automatically be corrected in the market.
Imported goods become expensive when the demand for a currency is low and its value decreased, thus stimulating demand for local goods and services. This in turn will generate more jobs, and hence an auto-correction would occur in the market. A floating exchange rate is constantly changing.
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