A floating exchange rate is a system where the value of a currency is determined by the market forces of supply and demand, rather than being fixed to the value of another currency. It determines a currency’s value in relation to other currencies.
In a floating exchange rate system, currency values are kept in constant motion because of market conditions, including changes in interest rates, inflation, and geopolitical events, tourism and many more.
Traders monitor economic indicators such as GDP growth, inflation, and employment data, as these can influence currency values in a floating exchange rate system.
Floating exchange rates can be quite volatile, but for currency speculators, who make up the great majority of forex traders, this volatility is seen as a positive thing.
Comments
0 comments
Article is closed for comments.