Revaluation occurs under fixed exchange rate regimes as which description?

• A. An increase in the value of a currency that is set under a fixed exchange rate regime.
• B. A decrease in the value of a currency that is set under a fixed exchange rate regime.
• C. The movement of money for investment in foreign markets.
• D. The rate of currency depreciation in a floating regime.

Answer: (A)

Revaluation is an upward adjustment of the fixed exchange rate, which raises the value of the domestic currency relative to foreign currencies. In a fixed regime, authorities peg the currency at a specific level; when they revalue, they lift that peg so the currency becomes stronger. Practically, one unit of the domestic currency can buy more foreign currency than before. Revaluation is typically achieved by actions like selling foreign exchange reserves or tightening monetary policy to support a higher peg. It contrasts with devaluation (lowering the peg) and with floating regimes, where exchange rates move due to market forces rather than official adjustments.