floating exchange rate

(redirected from Fluctuating Exchange Rates)

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 ?
Firms are concerned about fluctuating exchange rates and are looking for assurances around trade as well as immigration.
Firms are increasingly concerned about fluctuating exchange rates and that they are struggling to hire candidates across the skills spectrum.
Our research indicates that while both of those are happening to some level, not all foreign buyers have reacted in the same way to fluctuating exchange rates.
The Brexit vote and fluctuating exchange rates have had the most significant direct impact.
For example, they allow exporters to fix their prices despite fluctuating exchange rates, and banks to offer fixed-rate mortgages even as interest rates move.
These policies have already created havoc in terms of making foreign capital flowsmore volatile and causing rapidly fluctuating exchange rates.
The BCT said the latest developments recorded in the value of the dinar reflect the reality of supply and demand on the foreign exchange market which is followed by the BCT, to intervene to regulate the market if necessary to fight against fluctuating exchange rates.
He attributed the drop in the number of Umrah pilgrims to global economic downturn and the fluctuating exchange rates.
In addition, the unit prices charged for smartphones are expected to increase, driven up by fluctuating exchange rates, mainly due to the appreciating exchange value of the US dollar.
In fact, you'll probably end up paying more, if you factor in fluctuating exchange rates and sales tax.
Football is an international business and that creates problems for clubs including the issues of negotiating across borders and fluctuating exchange rates," said Cortese.
The German Savory and Deli market registered volatile growth in US$ terms due to fluctuating exchange rates during 2009-2014.