Floating Exchange Rates


Floating Exchange Rates
   A system in which currencies have no fixed parities and exchange rates. Prices are determined by supply and demand in the free market. A country's currency strengthens or weakens based on the underlying strength of its economy and its relationship with its trading partners. An overly strong currency can damage exports by making its goods too expensive for other countries to buy. A weak currency makes its exports cheaper to buy and its imports more expensive. A sudden weakening of the currency may signal economic instability.
   ► See also Bretton Woods, Fixed Exchange Rate, Measuring an Economy (Company).

Financial and business terms. 2012.