Floating Currency


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Floating Currency

A currency whose value is determined by the free market. That is, the value of a floating currency changes constantly depending on the supply and demand for that currency, as well as the amount of the currency held in foreign reserves. An advantage to a floating currency is that it tends to be more economically efficient. However, floating exchange rates tend to be more volatile depending on the particular currency. A floating currency may undergo currency appreciation or currency depreciation, depending on market fluctuations. Most major currencies are floating currencies See also: Fixed exchange rate, Crawling peg, Managed float.
References in periodicals archive ?
Treasury Secretary Mnuchin saying that the dollar is "not a concern of mine," though he conceded that he believes in a strong dollar based on long-term fundamentals while affirming that he supports free floating currency markets.
These large and persistent trade imbalances have developed because the floating currency arrangement is inherently unstable.
The report added that "the risks to investors posed by a floating currency, in which currency value is largely determined by the market, comes from the potential for investors playing the market to lose their capital, should the currency swing dramatically.
As part of Egypt's reform programme, the CBE decided to move the EGP to a completely floating currency in November, which is now trading at its genuine exchange rate, noted the IMF.
First, Macri's government abolished exchange-rate controls and moved Argentina to a floating currency regime, with the Argentine peso allowed to depreciate by 60% against the US dollar in 2016.
Egypt's "migration to a managed floating currency regime in the coming weeks is now more feasible," he said.
The point is we have a floating currency and it would be good for exports.
The point is we have a floating currency and it will be good for exports," he told the BBC.
Mexico has been one of the most orthodox adherents among emerging markets to IMF doctrine, such as a freely floating currency, and only Colombia and Poland have received similar credit lines.
Governor Raghuram Rajan is looking to revive plans for a freely floating currency.
A 20 per cent move in a free floating currency is a six sigma black swan event that should happen only once in a billion years if the universe was run forward in time again.
Without a freely floating currency, prices, wages and unemployment could fluctuate markedly, and that would create havoc for people and businesses, the Governor said, illustrating the point with a hypothetical scenario that examines what would have happened had the Bank tried to prevent the dollar from appreciating between 2005 and 2008.