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 added some clarification over his dollar comments, that over the short term USD weakness is not a "concern" and he supports "free and floating currencies," and said a stronger currency would be reflective of the economy.
He added: "Moneychangers are dealing carefully with floating currencies and the decisions on whether to sell or not.
The experience with floating currencies since the early 1970s provides more than 40 years of data about changes in cross border investment flows and changes in the prices of currencies.
Indeed, the search for monetary stability in a new era of floating currencies in the 1970s and 1980s hardly figures in his explanation of European integration.
Floating currencies and greater foreign exchange reserves in many countries suggest less risk today, and the readiness of central banks to provide liquidity should mean that re-runs of the last two crises are less likely.
Actually, floating currencies are moving more towards pegs and capital controls.
Mourlon-Druol (economic and social history, the University of Glasgow) examines the historical development of the European consensus on European monetary cooperation in a world of floating currencies.
On the other hand, the orderly history of debt under floating currencies may reflect the relatively short period most countries have actually had floating currencies.
to the present day, explaining in straightforward layman's terms the effects of inflation, deflation, and floating currencies along with their effect on prices, wages, taxes, and debt.
And floating and fixed exchange-rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).
Writing in the Financial Times, Zoellick called for a "Bretton Woods II" system of floating currencies as a successor to the Bretton Woods fixed-exchange rate regime that broke down in the early 1970s.
It's a mixture of fixed and floating currencies that is beginning to foster not just dis-inflationary or deflationary risks in some advanced countries, but inflationary risks in emerging markets.