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Devaluation/Undervaluation of currency?

Can anyone give me a clear distinction between the two? It might be quite obvious, however, they seem practically the same to me??

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One Response to “Devaluation/Undervaluation of currency?”

  1. Devaluation means that the value was decreased, it indicates some action that caused the value of the currency to decrease relative to some other currency.

    Undervalued means that the currency is currently in a state below where it should be. It doesn't indicate action, but rather the state it is in.

    There is significant difference. A currency being devalued means it is decreasing, while a currency that is undervalued is likely to appreciate at some time in the future.

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