Difference between fixed exchange rate and floating exchange rate
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The floating exchange rate is an exchange rate that is based upon supply and demand in the foreign exchange (currency) market. The other type of exchange rate is the fixed exchange rate, an exchange rate that is pegged by a government's monetary authority to a set rate.
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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.
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