ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.

Detailed explanation-2: -Major currencies, such as the Japanese yen, euro, and the U.S. dollar, are floating currencies-their values change according to how the currency trades on foreign exchange or forex (FX) markets. This type of exchange rate is based on supply and demand.

Detailed explanation-3: -A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.

Detailed explanation-4: -A floating exchange rate refers to a currency where the price is determined by supply and demand factors relative to other currencies. A floating exchange rate is different to a fixed – or pegged – exchange rate, which is entirely determined by the government of the currency in question.

Detailed explanation-5: -Reserve Bank of India (RBI) Governor Shaktikanta Das said that the Indian Rupee (INR) is a free floating currency and that its exchange rate is determined by the market.