What is a decrease in the value of a currency within a fixed exchange rate system known as?

In a fixed exchange rate system, a decrease in the value of a currency is specifically referred to as "devaluation." This occurs when a government or central bank officially sets a lower value for its currency relative to other currencies. This action is typically taken in response to economic conditions, such as persistent trade deficits or to enhance the country's competitiveness by making its exports cheaper.

Devaluation is distinct from depreciation, which typically describes a decline in value that occurs in a flexible exchange rate system due to market forces. Unlike depreciation, which happens automatically through supply and demand dynamics, devaluation is an active policy decision made by the authorities governing the currency. Hence, while depreciation and devaluation both imply a reduction in currency value, the context of a fixed exchange rate system and the method of occurrence differentiates devaluation as the correct term in this scenario.