There are several reasons for the general devaluation of the currency:

1, too much debt; Under normal circumstances, investors and speculators will determine the value of money according to key macro factors. Countries with excessive debts usually devalue their currencies, so they are regarded as too risky by investors. Excessive debt will also cause interest payment to occupy too much national budget, reduce national productivity and hinder economic growth. The national credit rating will also be damaged by excessive debt, which will further increase the borrowing cost and cause harm to economic development. A country facing a large amount of debt may also devalue its currency to reduce the real value of debt.

2. Central bank business; The central government plays an important role in currency valuation. Every central bank controls its own coinage right and holds a large amount of foreign exchange reserves. The world central bank holds huge foreign exchange reserves and supervises them according to future trends. Most central banks have two tasks in monetary policy, namely, controlling inflation and ensuring economic growth. The central bank mainly achieves its goal by controlling the flow of money. By lowering interest rates or reducing bank reserves, the central bank can let more funds flow in the market. But increasing the money supply will also reduce the value of money, which is the most basic principle of supply and demand.

3. Economic growth and central bank policy; When evaluating the purchasing power of money, investors will consider a country's growth expectations. If the future economic growth looks bad or goes into recession, speculators will assume that the central bank will increase monetary liquidity to stimulate the economy. Low interest rates reduce borrowing costs and increase economic activities. Therefore, economic slowdown will lead to loose coinage policy, which also means currency depreciation.

4. Currency crisis; When speculators quickly lose confidence in a country's economic or monetary policy, a currency crisis will occur, which is usually caused by the default of national debt. During the crisis, there was great selling pressure, because currency holders competed to sell their currencies. Typical examples of modern economic crisis are Latin American crisis of 1994, Asian crisis of 1997 and Zimbabwe crisis after 2000.

5. The special situation of the US dollar as a reserve currency; The dollar is facing a special environment because it is considered as the world's reserve currency, which means that it is the reserve currency of most countries. The dollar is also the default currency for oil trade. Due to its special status, the transaction of this currency itself has certain advantages. But in the long run, the dollar will be in an obvious depreciation trend.

This answer was recommended by Cheng Wei, an expert in economic and financial classification.

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