Revaluation is the official and deliberate increase in the value of a country’s currency in relation to another currency under a fixed exchange rate system. It is the direct opposite of devaluation.

Why countries revalue:

• To address persistent trade surpluses when a currency is pegged too low.
• When rising foreign exchange reserves suggest that the currency is currently undervalued.
• To make imports cheaper, which helps to lower domestic inflation.

Economic effects:

• Exports become more expensive for foreign buyers, leading to fewer sales.
• Imports become cheaper for domestic consumers, leading to higher import volumes.
• The trade balance typically worsens as the cost of exports rises and import demand grows.
• Industries that rely heavily on exporting goods usually see a decline in demand.

Key distinction: It is important to note that appreciation happens through free-market forces under a floating exchange rate, whereas revaluation is a specific action taken by a government or central bank under a fixed rate system.