pure floating exchange rate

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A floating exchange rate which is set by the market without any intervention by central banks or governments. Under pure floating the exchange rate is whatever private speculators believe it should be. There is thus a risk of extreme fluctuations in exchange rates, and for this reason very few countries allow a completely clean float for their currencies. Most countries attempt some degree of official intervention intended to stabilize the foreign exchange markets. See also managed floating exchange rate.

Subjects: Economics.

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