ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A floating exchange rate is one that is determined by supply and demand on the open market. A floating exchange rate doesn’t mean countries don’t try to intervene and manipulate their currency’s price, since governments and central banks regularly attempt to keep their currency price favorable for international trade.

Detailed explanation-2: -In a floating regime, exchange rates are generally determined by the market forces of supply and demand for foreign exchange.

Detailed explanation-3: -A floating exchange rate refers to an exchange rate system where a country’s currency price is determined by the relative supply and demand of other currencies. Currencies with floating exchange rates can be traded without any restrictions, unlike currencies with fixed exchange rates.

Detailed explanation-4: -Managed Floating Rate System: It refers to a system in which foreign exchange rate is determined by market forces and central bank influences the exchange rate through intervention in the foreign exchange market.

Detailed explanation-5: -Floating rates are determined by the market forces of supply and demand. How much demand there is in relation to the supply of a currency will determine that currency’s value in relation to another currency.