Fixed, floating and managed exchange rates
Fixed exchange rate
A fixed exchange rate, sometimes (less commonly)called a pegged exchange rate, is a type of exchange rate regime where a currency’s value is matched to the value of another single currency (most often the US Dollar), to a basket of other currencies, or to another measure of value, such as gold.As the reference value rises and falls, so does the currency pegged to it.A currency that uses a fixed exchange rate is known as a fixed currency.
Floating exchange rate
A floating exchange rate is a type of exchange rate regime wherein a currency’s value is allowed to fluctuate according to the foreign exchange market.A currency that uses a floating exchange rate is known as a floating currency.The opposite of a floating exchange rate is a fixed exchange rate.
Managed floating exchange rate
Exchange rates fluctuate from day to day.But central banks attempt to influence their countries exchange rates by buying and selling currencies.It is also known as a dirty float.