- Fixed and Adjustable:
- Government/central bank sets the rate.
- Rate is adjusted (devalued/revalued) by authorities.
- Used to correct balance of payment issues or inflation.
- Floating (Free Float):
- Currency value determined purely by market demand and supply.
- Central bank does not intervene.
- Example: US Dollar.
- Managed Float:
- Currency value is market-determined.
- Central bank intervenes occasionally to reduce volatility.
- It does not aim to set a specific price band.
- Example: Indian Rupee.
| Feature | Fixed and Adjustable | Floating (Free Float) | Managed Float |
|---|---|---|---|
| Control | Government/Central Bank fixes and adjusts | Market forces (demand/supply) | Market forces, with Central Bank intervention |
| Intervention | Direct and deliberate adjustments | No intervention | Occasional intervention to curb volatility |
| Example | India (before 1993) | US, Japan | Indian Rupee |