Floating Currency

A floating currency is contrasted with a fixed currency.

A floating currency is a currency that uses a floating exchange rate as its exchange rate regime.

In the modern world, the majority of the world's currencies are officially but not really floating, including the most widely traded currencies: the United States dollar, the Japanese yen, the euro, the British pound and the Australian dollar.

The Canadian dollar most closely resembles the ideal floating currency[citation needed], as that their central bank has not interfered with its price since it officially stopped doing so in 1998. The United States is a close second with very little changes in its foreign reserves; by contrast, Japan and the UK continually interfere with the prices of their respective currencies.

From 1946 to the early 1970s, the Bretton Woods system made fixed currencies the norm; however, in 1971, the United States government abandoned the gold standard, so that the US dollar was no longer a fixed currency, and most of the world's currencies followed suit.

A floating currency is one where targets other than the exchange rate itself are used to administer monetary policy. See open market operations.