floating exchange rate

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Floating exchange rate

A country's decision to allow its currency value to change freely. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating Exchange Rate

The exchange rate in which the value of the currency is determined by the free market. That is, a currency has a floating exchange rate when its value 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 exchange rate is that it tends to be more economically efficient. However, floating exchange rates tend to be more volatile depending on the particular currency. A currency with a floating exchange rate may undergo currency appreciation or currency depreciation, depending on market fluctuations. A floating exchange rate is also called a flexible exchange rate. See also: Fixed exchange rate, Crawling peg, Managed float.

floating exchange rate

An exchange rate between two currencies that is allowed to fluctuate with the market forces of supply and demand. Floating exchange rates tend to result in uncertainty as to the future rate at which currencies will exchange. This uncertainty is responsible for the increased popularity of forward, futures, and option contracts on foreign currencies. Also called flexible exchange rate. Compare fixed exchange rate.
References in periodicals archive ?
Suzuki will have to contend with the usual issues, namely a small dealer network, a modest promotional budget and the vagaries of fluctuating exchange rates.
Football is an international business and that creates problems for clubs including the issues of negotiating across borders and fluctuating exchange rates," said Cortese.
For success here, Suzuki will have to contend with the usual issues, namely a small dealer network, a modest promotional budget and the vagaries of fluctuating exchange rates.
With interest and fluctuating exchange rates, the total compensation they were awarded is close to PS1million.
Fluctuating exchange rates impacted first-quarter proceeds by 8 percent, but the loss was offset by an 8 percent benefit from acquisitions, executives said.
Fluctuating exchange rates and volatile market developments may, however, impact the bank's earnings in the coming year.
It involves office costs, taxes and fluctuating exchange rates.
The new prepaid card helps pilgrims avoid carrying foreign currency in order to shield them from fluctuating exchange rates when travelling overseas.
Exports provide potentially lucrative sources of revenue, as well as a means of expansion--more so now than ever before--yet many businesses are oblivious to the impact that fluctuating exchange rates can have on their bottom line.
Domestic currency settlement removes the worry associated with the risk of fluctuating exchange rates, offering the consumer peace of mind.
Our research highlighted that volatility, and particularly the increase in the prices of raw material, which is often exaggerated by fluctuating exchange rates, is a key concern and challenge.
Ammar Aker, CEO of Paltel Group, said: "The Group's operating environment remains influenced by a string of challenges and they are manifested by a deepening economic crisis, increase in tax tariffs, fluctuating exchange rates, increase in infrastructure development costs; all contributing to placing a strain on the financial performance of the Group.