Floating exchange rate-the monetary authority of a country does not stipulate the upper and lower limits of exchange rate floating, and the exchange rate floats freely with the supply and demand relationship in the foreign exchange market. If the local currency is linked to the base foreign currency and the exchange rate fluctuates, it is called linked exchange rate or pegged exchange rate system.
Floating exchange rate system means that the central bank of a country does not stipulate the official exchange rate between its own currency and other countries' currencies, but allows the exchange rate to be determined spontaneously by the foreign exchange market. Floating exchange rate system is divided into free floating and management floating.
Free floating, also known as "clean floating", means that the central bank does not take any intervention activities in the foreign exchange market, and the exchange rate is completely determined by market forces spontaneously; Managed floating, also known as "dirty floating", refers to countries with floating exchange rate system. In order to control or slow down the fluctuation of the market exchange rate, the central bank intervenes in various forms in the foreign exchange market, mainly by selling or buying foreign exchange according to the situation of the foreign exchange market and influencing the exchange rate through the influence on supply and demand.
Under the floating exchange rate system, the main factors affecting the exchange rate are: the value represented by the currency itself, a country's balance of payments, interest rates, the intervention of governments and central banks in the foreign exchange market, politics, psychology, speculation and other factors.
The floating exchange rate system is conducive to adjusting the economy and promoting international trade through exchange rate fluctuations. Especially in the case that the central bank's foreign exchange and gold reserves are insufficient to maintain a fixed exchange rate, the floating exchange rate system is beneficial to the economy and can also ban illegal foreign exchange black market transactions. However, the floating exchange rate system is not conducive to the stability of domestic and international economic relations and will intensify economic activities.
exchange rate
The abbreviation of "exchange rate" is ExRate, which is also called "foreign exchange quotation", "foreign exchange market" or "exchange rate". EXRATE is the abbreviation of "exchange rate" in English. It is the ratio of one currency to another, and the price of another currency is expressed in one currency.