Pure Floating Exchange Rate

Definition of 'Pure Floating Exchange Rate'

A floating exchange rate which is set by the market without any intervention by central banks or government.

This is contrasted with a Dirty float in which there is some government intervention in the foreign exchange market.

With a Pure Floating Exchange Rate, the rates of exchange are whatever private speculators believe they should be, and as such there is the possibility of huge movements. Hence most governments intervene to stabilise foreign exchange markets.

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