DEFINITION of Revaluation Rates
Revaluation rates are market currency rates from a specific point in time that are used as a base value by currency traders to assess whether a profit or a loss has been realized for the day. In most cases, the revaluation rate is the closing rate for the previous trading day.
Revaluation rates are often referred to as just "reval rates"
BREAKING DOWN Revaluation Rates
For example, in order to assess how much profit a currency trader made today, he or she would use yesterday's closing rate (today's revaluation rate) of 1.15 USD/CAD as a baseline for comparing today's closing rate of 1.145 USD/CAD. If the trader shorts the U.S. dollar in early trading and then buys it back at the end of the day, he or she will make $0.005 for every U.S. dollar traded.
Many equity and bond portfolio managers will use the daily WMR/Reuters rates to reval their portfolios. The WMR rates are calculated using an average rate over a one minute trading period, which is 30 seconds before and 30 seconds after 4pm London time. By doing this the funds are able to give their investors are precise value of the portfolio at the given period of time.
The revaluation rate is important for retail investors in that if a position they have is revalued a significant loss the investor might be margin called and be required to further fund their account of they wish to continue to hold the position.