floating exchange rate

(redirected from Fluctuating Exchange Rate)

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 ?
The foreign capital market posed new challenges to the banks' overseas strategies, especially the fluctuating exchange rate, which affected the liquidity of yuan.
The fuel surcharge benchmark list (sales in Japan) for the fiscal year of 2015 between April 1, 2015 and March 31, 2016 (see below) has been adjusted from fiscal year 2014 to further strengthen the resistance against a fluctuating exchange rate for the Japanese yen.
The devaluation of rupee he said against dollar and the constantly fluctuating exchange rate has raised Pakistan's external debt by Rs.
He explained that in a net importing country, the fluctuating exchange rate could have a huge impact on inflation levels, "we import the majority of nutritional items, such a lift will negatively affect the prices" added the banker.
The business community considers that a fluctuating exchange rate would create more money for investments and the economy would liven up.
Chang pointed out that the greenback will continue to weaken in the coming years, leading to fluctuating exchange rate of the NT dollar and erosion of exporters?
He's not too concerned about the fluctuating exchange rate, even though it meant he had to back out of a deal with a US supplier to buy a piece of kit worth almost pounds 100,000.
Here, Rajan disagrees with the position that in our modern world the only viable exchange rate regime is either a freely fluctuating exchange rate regime or a fixed exchange rate regime.
The situation surrounding the fuel pricing system in Cyprus has created an environment where consumers follow the price of a barrel of crude and the fluctuating exchange rate of the euro compared to the US dollar "in an effort to understand if there will be reductions and when.
Governor Jorgovanka Tabakovic, said, 'A major part of the economy, many Serbian citizens, as well as the state, depend on the value of the dinar and it is very significant that the NBS ensure that changes in the target inflation rate and the fluctuating exchange rate do not take place suddenly or by leaps and bounds.
Academician Taki Fiti, on the other hand, believes that the fluctuating exchange rate, which has been argued for a long time as a means to invigorate the economy should be done after the crisis is over.
He warned that the fluctuating exchange rate and the high debt to income ratio remain challenges towards achieving the needed truck sale growth opportunities.