The so-called fixed exchange rate system means that the exchange rate is based on the gold content of the currency, forming a fixed ratio between exchange rates. The exchange rate under this formulation is either regulated by the input and output of gold or fluctuates within a legal range under the control of the monetary authorities, so it is relatively stable.

What is a floating exchange rate system?

Floating exchange rate is relative to fixed exchange rate system. It means that a country does not stipulate the gold parity between its own currency and foreign currency and the fluctuation range of exchange rate, and officials of various countries do not undertake the obligation to maintain the fluctuation limit of exchange rate, but let the exchange rate float freely with the change of supply and demand in the foreign exchange market. Under this system, foreign exchange has completely become a special commodity in the international financial market, and the exchange rate has become the price for buying and selling this commodity.