Fixed and floating exchange rates

When the government of a country regulates the rate at which its currency is in exchange for other currencies , then it is known as fixed or managed or pegged or official exchange system. The rate of exchange between Nepali and Indian Currency is fixed exchange system.
If the exchange rates move, as in any other market place, depending upon the demand andsupply pressures that are further influenced by market forces and economic conditions of the respective countries, then it is called floating exchange rate

In 1971 fixed exchange rate system was replaced by a system under which US dollar was permitted to float


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