Currency depreciation and devaluation both describe a decline in the value of a country's currency, but they happen through different mechanisms. Currency depreciation occurs under a floating or flexible exchange-rate system when the currency loses value because of market forces. Changes in supply and demand, inflation, interest rates, economic conditions, political uncertainty, trade balances, and investor sentiment can all contribute to depreciation. For example, if demand for a currency falls in the foreign exchange market, its exchange rate may decline relative to other currencies.

Devaluation, on the other hand, is an official reduction in the value of a currency by a country's government or central bank. It generally occurs under a fixed or managed exchange-rate system, where authorities deliberately adjust the currency's official exchange rate. A government may devalue its currency to make exports cheaper for international buyers, encourage domestic production, or address persistent trade imbalances.

The key distinction is therefore market-driven versus policy-driven. Depreciation results from normal market activity, while devaluation is a deliberate policy decision.

Both can make imported goods and foreign services more expensive for domestic consumers. They can also improve export competitiveness by making domestically produced goods relatively cheaper for overseas buyers. However, the effects depend on factors such as inflation, the country's trade structure, foreign debt exposure, and how businesses and consumers respond.

In simple terms, if a currency loses value because traders and investors sell it in the market, this is depreciation. If authorities officially lower its value against other currencies, this is devaluation.