What do you mean by managed currency system?

Question: What do you mean by managed currency system?

A managed currency is one where a nation's government or central bank intervenes and influences its value or buying power on the market, particularly in foreign exchange markets. Central banks manage currency by issuing new currency, setting interest rates, and managing foreign currency reserves  .

In practice, most currencies today are nominally free-floating on the market versus one another. However, central banks will step in when they judge it useful to support or weaken a currency if the market price falls or rises too much in relation to other currencies. In extreme cases, managed currencies may have a fixed or pegged exchange rate that is maintained through continuous, active management versus other currencies.

The degree to which the currency issuer actively intervenes determines whether a currency is considered a managed currency or not at any given point in time. This degree of active management also determines whether the currency has a fixed or floating exchange rate.

Overall, managed currencies aim to achieve price stability and economic growth while managing their exchange rates in the global market.

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