Floating Exchange Rate
a.k.a. Free float, Floating currency
An exchange rate set by supply and demand in the market, without a government target.
In plain English
An exchange rate set by supply and demand in the market, without a government target.
With a floating exchange rate, the currency's price moves freely as traders, companies and investors buy and sell. Most major currencies, including the dollar, euro, yen and pound, float.
Central banks influence floating currencies through interest rates and words, and occasionally intervene, but they do not defend a set level. Compare fixed and dirty float.
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