Historically, early currencies were typically coins, struck from gold or silver by an issuing authority, which certified the weight and purity of the precious metal.
The reason for this is that speculators do not have perfect information; they sometimes find out that a country is low on foreign reserves well after the real exchange rate has fallen.
A devaluation in the exchange rate lowers the value of the domestic currency in relation to all other countries, most significantly with its major trading partners.
[4] After the war, US Lend-Lease funding, which had helped finance the UK's high level of wartime expenditure, abruptly ended and the Anglo-American loan was conditional upon progress towards sterling becoming fully convertible into US dollars, thereby aiding US trade.
[6] The exchange rate reverted to its pre-convertibility level, a devaluation being avoided by the new Chancellor of the Exchequer, Stafford Cripps, choking off consumption by increasing taxes in 1947.
By 1949, in part due to a dock strike, the pressure on UK reserves supporting the fixed exchange rate mounted again at a time when Cripps was seriously ill and recuperating in Switzerland.
[13] By 1966, pressure on sterling was intensifying, due in part to the seamen's strike, and the case for devaluation being articulated in the higher echelons of government, not least by the deputy prime minister George Brown.
[14] Wilson resisted and eventually pushed through a series of deflationary measures in lieu of devaluation including a 6 month wage freeze.
[15][16] After a brief period in which the deflationary measures relieved sterling, pressure mounted again in 1967 as a consequence of the Six-Day War, the Arab oil embargo and a dock strike.
[18][16] In a broadcast to the nation the following day, Wilson said, "Devaluation does not mean that the value of the pound in the pocket in the hands of the … British housewife … is cut correspondingly.
[21] The People's Bank of China devalued the renminbi twice within two days by 1.9% and 1% in July 2015 in response to slowing economic growth, leading to the 2015–2016 Chinese stock market turbulence.
Although the devaluation was welcomed by the International Monetary Fund, it led the United States Department of the Treasury to label China as a currency manipulator in 2019.