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Floating Exchange Rate

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PPGPortal > Home > Concept Dictionary > F, G, H > Floating Exchange Rate

Floating Exchange Rate 

A currency has a “floating” exchange rate if the value of that currency is permitted to rise and fall on the market for foreign exchange according to supply and demand for that currency.

(Peter Dungan, Toronto PPG1002H and Mankiw, N. Gregory, Ronald Kneebone, Kenneth J. McKenzie and Nicholas Rowe. 2008. Principles of Macroeconomics, 4th Canadian ed. Toronto: Thomson Nelson.)


Where there exists a “floating” exchange rate, the government does not intervene in the market for foreign exchange in an effort to keep the exchange rate at a particular pre-determined level.


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