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06 February 2007
The official exchange rate for buying cash notes and transactions of one USD reached nine Ethiopian birr for the first time.
Since Ethiopia began a free market economy after the fall of the Derg regime, the foreign exchange rate has been determined by market forces. The exchange rate for buying both cash notes and transactions has reached 9.0157 birr for one USD on January 26, 2007.
In common modern usage, devaluation (a reduction in the value of a currency with respect to other monetary units) specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency.
A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.
In contrast, depreciation is most often used for the unofficial decrease in the exchange rate in a floating exchange rate system (a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange rate).
The value of currency is determined by the interplay of money supply and money demand.
By staff reporter - Capital