A
floating exchange rate in which a government intervenes at some frequency to change the direction of the float by
buying or
selling currencies. Often, the local government makes this intervention, but this is not always the case. For example, in 1994, the American government bought large quantities of Mexican
pesos to stop the rapid loss of the peso's value.
Strictly speaking, even a central bank's intervention to raise or lower
interest rates could be considered a managed float. However, because most floating currencies manage their regimes with occasional central bank involvement, the term applies mainly to frequent or dramatic interventions. A managed float is also known as a dirty float. See also: 1994 Mexican economic crisis,
Floating currency,
Fixed exchange rate.