Question

What are the major currency exchange regimes in the world?

Answer 1

The currency exchange regime is the way in which a country manages it's currency with respect to other foreign currencies and the FOREX market.

Below are the major currency exchange regimes in the world.

1. Fixed Exchange Rate
2. Floating Exchange Rate
3. Pegged Exchange Rate

A fixed exchange rate is a regime applied by a country where the particular country ties the official exchange rate to another country's currency.

This is to maintain its currency rate within a band (usually a narrow band).

In Floating Exchange Rate regime, the currency rate is set by the foreign exchange market through supply and demand for that particular currency relative to other currencies.

Pegged Exchange Rate is similar to fixed exchange rate, but it maintains a range/band much wider than the fixed exchange rate.