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Floating Exchange Rate Fixed Exchange Rate Managed-Floating Exchange Rate

A currency is free-floating if its exchange rate is allowed to vary against that of other currencies

Determined by the market forces of supply and demand

Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world

A movable or adjustable peg system is a system of fixed exchange rates

With a provision for the devaluation of a currency

e. g. Chinese Yuan renminbi (RMB) was pegged to the United States dollar at RMB 8.2768 to $1from 1994 to 2005

An exchange rate system which is based on the free float but with the intervention of the Central Bank.

Central bank keep the rate at a fixed price by using its different tools and methods

Appreciation of Currency means increasing the value of currency in terms of others international currencies based on demand and supply.

Depreciation of currency means reduction in the value of currency in terms of other international currencies based on demand and supply.

Devaluation of currency means the planed reduction in the value of currency by the Govt. based on the fixed exchange rate.

Revaluation of currency means the planed increase in the value of currency by the Govt. based on fixed exchange rate.

1 Economic factor 2 Political factors 3 Market psychologies

Monetary policies of the central bank Health of an economy Trade policies Currency inflation and deflation The Balance of Payments The Law and Order situation

The Political Stability The Market Trends The Relative Inflation Rates The Relative Interests Rates The amount of Investments in the country The Foreign remittances

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