Floating Versus fastened Exchange Rates

Currency costs is determined in 2 ways: a floating rate or a hard and fast rate. As mentioned higher than, the floating rate is sometimes determined by the open market through provide and demand. Therefore, if the demand for the currency is high, the worth can increase. If demand is low, this can drive that currency value lower.

A fixed or pegged rate is decided by the govt. through its financial institution. the speed is ready against another major world currency (such because the U.S. dollar, euro, or yen). to keep up its rate, the govt. can get and sell its own currency against the currency to that it's pegged. Some countries that value more highly to peg their currencies to the U.S. greenback embrace China and Saudi Arabia. 

The currencies of most of the world's major economies were allowed to float freely following the collapse of the Bretton Woods system between 1968 and 1973.