In an open market, the perception that a devaluation is imminent may lead speculators to sell the currency in exchange for the country's foreign reserves, increasing pressure on the issuing country to make an actual devaluation. When speculators buy out all of the foreign reserves, a balance of payments crisis occurs. Economists Paul Kurgan and Maurice Ousted present a theoretical model in which they state that the balance of payments crisis occurs when the real exchange rate exchange rate adjusted for relative price differences between countries is equal to the nominal exchange rate Kurgan, Paul and Maurice Ousted. International Economics (2000), in practice, the onset of crisis has typically occurred after the real exchange rate has depreciated below the nominal rate. The reason for this is that speculators do not have perfect information; they sometimes find out that a country is low on foreign reserves well after the real exchange rate has fallen. In these circumstances, the currency value will fall very far very rapidly. This is what occurred during the 1994 economic crisis in Mexico.

Steady process of inflation is not considered devaluation, although if a currency has a high level of inflation, its value will naturally fall against gold or foreign currencies. Especially where a country deliberately prints money a usual cause of hyperinflation to cover a persistent budget deficit without borrowing, this may be considered devaluation.

In some cases, a country may revalue its currency higher the opposite of devaluation in response to positive economic conditions, to lower inflation, or to please investors and trading partners. This would imply that existing currency increased in value, as opposed to the case where a country issues a new currency to replace an old currency that had declined excessively in value.