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Freely Floating Exchange Rate System |
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Freely floating exchange rate system Monetary system in which exchange rates are allowed to move due to market forces without intervention by country governments. Floating Exchange Rate System The practice in which a central bank buys and sells one or more foreign currencies in order to affect the exchange rate of its own currency. To give a very simple example, if a central bank believes its own currency is overvalued, it may buy other currencies on the open market to increase demand and therefore the price of these currencies. The extra demand will likely drive down the exchange rate of its own currency to a lower level. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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