Managed float regime

A system of floating exchange rates in which the government or the country's central bank occasionally intervenes to change the direction of the value of the country's currency. In most instances, the intervention aspect of a dirty float system is meant to act as a buffer against an external economic shock before its effects become truly disruptive to the domestic economy.

Also known as a "managed float".

Investopedia Says:
For example, country X may find that some hedge fund is speculating that its currency will depreciate substantially, thus the hedge fund is starting to short massive amounts of country X's currency. Because country X uses a dirty float system, the government decides to take swift action and buy back a large amount of its currency in order to limit the amount of devaluation caused by the hedge fund.

A dirty float system isn't considered to be a true floating exchange rate because, theoretically, true floating rate systems don't allow for intervention.

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Foreign exchange rate that is influenced to one degree or another by market Intervention by the issuing country's monetary authority. Most western currencies, including the French franc, Italian lira and, to a lesser extent, U.S. Dollar and Japanese yen, fall into this category. The opposite is Clean Float.

Managed float regime is the current international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies. It is also known as a dirty float.

In an increasingly integrated world economy, the currency rates impact any given country's economy through the trade balance. In this aspect, almost all currencies are managed since central banks or Governments intervene to influence the value of their currencies.

See also

• December Mistake
• Black Wednesday
• Fixed exchange rate
• Floating exchange rate

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