Managed Floating

Managed Floating Exchange Rate System

It is the contemporary international financial environment in which the exchange rates vary from day to day. However, central banks try to influence their nations’ exchange rates by purchasing and selling currencies to perpetuate a certain span.

Without any authorised worldwide agreement, the world has progressed on to what can be elucidated as a regulated floating exchange rate system. This rating system is a blend of a flexible exchange rate system and a fixed rate system, i.e., the managed part. Central banks interfere to purchase and sell foreign currencies by trying to average the exchange rate movements whenever such pursuits are feasible. Hence, the official reserve transactions are not equal to zero.

Exchange rate or forex rate is the rate at which the domestic currency is exchanged for a foreign currency. Likewise, it is the rate that depicts the value of domestic currency in expressions of other currencies. Here, the value of a rupee is nothing but the value computed in terms of other currencies like the US Dollar ($).

The exchange rate system is the organisation for the movement of exchange rate. There are fundamentally three types of exchange rate systems on a broad scale: floating or flexible exchange rate system, fixed exchange rate system, and managed floating (intermediate exchange rate system).

The concept mentioned explains in detail about managed floating for the students of class 12. To know more about such interesting concepts, stay tuned to BYJU’S.

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