Why Do Currencies Lose Value? Explained
By: Nikhil Pandey
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16 Dec 2025
Currencies lose value primarily due to inflation, which reduces purchasing power over time globally
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High government debt can lead to currency depreciation as investors lose confidence in repayment
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Political instability often causes uncertainty, prompting investors to sell the local currency rapidly
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Trade deficits weaken currency because more foreign currency is demanded to pay for imports
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Central banks printing excessive money supply can flood markets, causing currency value to fall sharply
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Changes in interest rates impact currency value, as higher rates attract foreign investment inflows
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Speculative attacks occur when traders bet against a currency, driving its value down quickly
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Economic recessions reduce demand for a country's currency, resulting in depreciation against others
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Currency manipulation by governments to gain trade advantages can distort and devalue their currency
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Global market sentiment and geopolitical tensions influence currency values through risk aversion or appetite
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Image: Reuters
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