How do countries devalue currency

On 6th June, 1966 India, hit by drought after two major wars (with China and Pakistan), devalued rupee by a massive rate: from Rs.4.76=$1 to Rs.7.50 = $1(57% devaluation). Again in July 1991, hit by gulf war and collapse of Soviet Union (India's main trading partner then), India devalued rupee from Rs.18=$1 to Rs.25 to $1. [June is a bad time for Indian rupee] .    Historical Exchange Rate Regime of Asian Countries.

Devaluation is usually a conscious process of  controlling currency in a fixed rate regime. To do this, the government  (that controls the forex market tightly) just have to announce that they  are moving to a new level against the dollar.

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Let me use this opportunity to explain how exchange rates work.

The state of Earthopia has 3 villages - Kumar Ville, Huville and Johnville. Initially they were all self-sufficient, with each of the villages producing all the rice, vegetables, brick and clothes required for all their inhabitants. Things are working so great since eternity.

Now, some villagers in Johnville found a new, faster way to make bricks. Thus, they started producing faster than the villagers there could buy. So, they thought they could sell some of them to the villagers in Huville that is going through a rainy season. In return for the bricks, Huville guys thankfully gave some extra rice. Johnville guys didn't need much rice, so they were willing to offer only one extra brick for every 10 bags of rice.

Meanwhile, Kumarville  is going through a drought season and go to beg the Johnville guys. So the John guys give them bags of rice, in return for the large pile of clothes. 

The exchange process was however complex. The barter system had so many issues (see more here:

What would a world without money be like?   So, a tribal leader from Johnville, let us call him Hamilson, thought he could use some specially made coins. He calls the specially made coins Daluro. He sets 1 brick equals 1 Daluro. Thus, Huville and Kumarville guys need to get these Daluro to buy stuff from Johnville guys.

Not to be left behind, the tribes of Kumarville and Huville give colorful names Rapi and Rambi to their own coins. 1 Rapi is set as 10 pair of clothes and 1 Rambi is set as 10 bags of rice. These coins are then used among the villagers to buy and sell stuff among themselves. At the current rate: 1 Rapi = 1 Rambi = 1 Daluro.   -- Equation 1.

Life is so good for Johnville people as they are getting a lot of , clothes and rice without working much. As the brick guys keep working hard, others start relaxing more. the new tribal leader Burke Bun is happy with this.

The drought in Kumarville ends and they start producing a lot of rice. Now, they are not in that need for the rice from Johnville and have a less need for Daluro. As richie's required less, Kumarville guys are willing to sell only 5 clothes for every 10 bags of rice. By previous equations, now 1 Rapi10 clothes = 20 bags of rice = 2 Daluro.

In the meanwhile, Huville have adapted a part of brick building process and have started producing enough bricks. They are now less willing to buy bricks from Johnville. They now set 1 Rambi = 10 bags of rice = 3 bricks = 3 Daluro.

This leaves the Johnville tribes with no options but to devalue their currency to accept the reality that 1 Daluro = 0.5 Rapi = 0.33 Rambi. This spurs the local farmers and weavers who can no longer buy rice and clothes from outside and start getting back to work again.

Devaluation is essentially recognizing that one's currency is significantly less than what it used to be. This happens when a country is not letting its currency trade in the markets and essentially sets how much its currency is set to a dollar or other currency. Devaluation is a sudden, overnight change.

Other answers are confusing the natural process of currency depreciation  (through inflation) with devaluation. Devaluation means a country's  government (and central bank) announces overnight a big change in the  country's exchange rate. It is usually a conscious process of  controlling currency in a fixed rate regime. To do this, the government  (that controls the forex market tightly) just have to announce that they  are moving to a new level against the dollar.