Floating Exchange Rate
A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Thus, floating exchange rates change freely and are determined by trading in the forex market. Contrast to "fixed exchange rate" regime.
Investopedia Commentary
In some instances, if a currency value moves in any one direction at a rapid and sustained rate, central banks intervene by buying and selling its own currency reserves (i.e. Federal Reserve in the U.S.) in the foreign-exchange market in order to stabilize the local currency. However, central banks are reluctant to intervene, unless absolutely necessary, in a floating regime.
Related Links
Floating And Fixed Exchange Rates
Forces Behind Exchange Rates
A Primer On The Forex Market
See also: Central Bank, Currency, Federal Reserve, Fixed Exchange Rate, Foreign Exchange, Trade
floating exchange rate