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 ?
Here the free trade theory argues that free floating currency will increase the competitiveness of Portuguese wine; but the last winemaker is already dead!
But, in a dollar denominated global trade environment, the ability of a floating currency regime to support full employment is severely limited.'
A floating currency will force firms and investors to hedge against fluctuations.
The UAE stands to gain from a floating currency and a monetary policy tailor-made to its economic needs, regardless of when.
As the renminbi increasingly becomes a two-way floating currency, market expectations are adapting accordingly, and one-way directional bets against it seem far riskier than before.
'Since the Asian Financial Crisis (in 1997) the ringgit has evolved into a fully flexible or floating currency. This is advantageous as it allows the ringgit to play its role as a shock absorber during times of stress,' he said, adding that businesses should be ready to manage their currency exposures prudently as exchange rate adjustments are unavoidable.
With not much fuss being raised by the interim government or the SBP (State Bank of Pakistan), one can only suppose they are reconciled to the fact that nothing much can be done as the PRs finds its balance in a free floating currency market (driven by market forces).
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.
Egypt's "migration to a managed floating currency regime in the coming weeks is now more feasible," he said.