Managed float - Financial definition
Concise definition of the term managed float
A managed float, also known as a dirty float, is a type of exchange rate regime where a currency's value is primarily determined by market forces but with occasional government or central bank intervention to stabilize or steer the currency's value.
Comprehensive definition of the term managed float
In a managed float exchange rate system, a currency’s value fluctuates in response to foreign exchange market supply and demand, but authorities may intervene to prevent excessive volatility or to achieve specific economic objectives. This intervention can take various forms, such as buying or selling currency reserves or adjusting interest rates.
For example, many emerging market economies adopt a managed float to balance between achieving competitive exchange rates for exports and maintaining control over inflation. Unlike a fixed exchange rate, where the currency is pegged to another currency or a basket of currencies, a managed float allows for more flexibility while still providing some level of stability and predictability in foreign exchange markets.