Revaluation

Revaluation Explained

Revaluation is the process of increasing the value of assets, goods, or currency. It's the opposite of devaluation, which decreases value. The process can be influenced by changes in the foreign currency market and exchange rates, impacting the worth of a country's assets. 

Revaluation in Different Currency Systems

In a fixed exchange rate system, the country's government, often the central bank, determines the value of the currency. This system provides stability and reduces uncertainty for traders and investors. Developing economies often use this system to limit speculation and maintain stability. 

Contrary to a fixed rate system, a floating exchange rate is determined by market forces of supply and demand without any intervention. The value of a currency in this system can fluctuate frequently based on changes in the foreign exchange market and associated exchange rates. 

India, for example, has used different systems over time. The country initially followed the pegged exchange rate system under the Bretton Woods Agreement until 1971, then pegged its rupee to the pound sterling and later to a basket of currencies of its main trading partners. Currently, India uses a managed floating exchange rate system, which is a combination of fixed and floating rate systems.