Under the fixed exchange rate regime, if the government of a country finds its currency to be overvalued and therefore deliberately reduces the value of its current against the foreign currency, it will be called as?

Devaluation of domestic currency.

The correct answer is Option (3) → Devaluation of domestic currency.

Under a fixed exchange rate system, the value of a country's currency is officially determined by the government or central bank.

• When the government reduces the value of its currency against foreign currencies deliberately, it is called devaluation.

• When the government raises the value of its currency under a fixed system, it is called revaluation.