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    Thread: Clean float and dirty float: what are the meaning?

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      Default Clean float and dirty float: what are the meaning?

      The terms clean float and dirty float what do they mean?
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      Default Re: Clean float and dirty float: what are the meaning?

      Clean Float: Value of the currency is determined by the market forces of supply and demand. Value of the asset depends on the supply and demand in the market and no other interference. usually, Government did not interfere in the determination of price, free from government intervention.

      Dirty Float: Exchange rates float from day to day but interference from Government side remain there actively like nowadays we see central banks try to control the rate of exchange on day to day basis.

      The dirty float is also being called "Managed float regime"

      Nowadays the majority of developed nations and developing nations are using dirty float or managed float regime because they have to protect their investors and public from threats of currency devaluation and overvaluations. central banks prefer not to publically acknowledge the fact but this is the bitter truth of this world.

      The speculative attack in the market is also controlled by the central banks while using managed float regime.
      Last edited by kashifrehman; 12-15-2018 at 03:30 PM.

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      Default Re: Clean float and dirty float: what are the meaning?

      Dirty floats:
      A dirty float is a floating exchange rate where country Central Bank occasionally intervenes to change the direction of the pace of change of a country currency value in most suspense the central bank in 34 system act as a buffer against an external economic shop before its effect became disruptive to the domestic economy added to float is also known as a managed float.
      Breaking down dirty floats:
      From 1946 until 1971 many of the world's major industrialized Nation participated in a fixed exchange rate system known as the bretton woods agreement this ended when President Richard Nixon took the United State of the Gold Standard on August 15 1971 since then most major industrialised economy have adopted floating exchange rates.
      many developing Nation seek to protect their domestic industries and trade by using a managed float where the central bank intervenes to guide the currency the frequency of such intervention veries for example the Reserve Bank of India closely manage the rupees with enough very narrow currency banned while the Monetary Authority of Singapore allows the local dollar to fluctuate more freely in an undisclosed band.
      Clean float:
      A clean float known as a pure exchange rate occurs when the value of a currency or its exchange rate is determined by supply and demand the float is money in the banking system that is briefly accounted twice due to delay and processing checks and can distort the money supply for the nation.
      Breaking down clean float:
      most of the worlds currencies exist as part of a floating exchange rate regime in this system currency value fluctuate In response to the movement in foreign exchange market you may have noticed that when you travel to the eurozone for example the amount of euro you can exchange for your dollar where is from trip to trip this variation is a result of the fluctuation in the foreign exchange market floating currency sit and contrast with fixed money which has a value based on the current market value of gold or another commodity floating currencies may also float in their relation to another currency or basket of currencies China was the last country to use it fixed currency giving it up in 2005 for a manage currency system.

      ---------- Post added at 07:27 PM ---------- Previous post was at 07:26 PM ----------

      Dirty floats:
      A dirty float is a floating exchange rate where country Central Bank occasionally intervenes to change the direction of the pace of change of a country currency value in most suspense the central bank in 34 system act as a buffer against an external economic shop before its effect became disruptive to the domestic economy added to float is also known as a managed float.
      Breaking down dirty floats:
      From 1946 until 1971 many of the world's major industrialized Nation participated in a fixed exchange rate system known as the bretton woods agreement this ended when President Richard Nixon took the United State of the Gold Standard on August 15 1971 since then most major industrialised economy have adopted floating exchange rates.
      many developing Nation seek to protect their domestic industries and trade by using a managed float where the central bank intervenes to guide the currency the frequency of such intervention veries for example the Reserve Bank of India closely manage the rupees with enough very narrow currency banned while the Monetary Authority of Singapore allows the local dollar to fluctuate more freely in an undisclosed band.
      Clean float:
      A clean float known as a pure exchange rate occurs when the value of a currency or its exchange rate is determined by supply and demand the float is money in the banking system that is briefly accounted twice due to delay and processing checks and can distort the money supply for the nation.
      Breaking down clean float:
      most of the worlds currencies exist as part of a floating exchange rate regime in this system currency value fluctuate In response to the movement in foreign exchange market you may have noticed that when you travel to the eurozone for example the amount of euro you can exchange for your dollar where is from trip to trip this variation is a result of the fluctuation in the foreign exchange market floating currency sit and contrast with fixed money which has a value based on the current market value of gold or another commodity floating currencies may also float in their relation to another currency or basket of currencies China was the last country to use it fixed currency giving it up in 2005 for a manage currency system.


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      Default Re: Clean float and dirty float: what are the meaning?

      Clean Float :
      Means Floating Exchange Rate Based On Market Forces of Demand and Supply Without Any Intervention From Authority Or Government But Government Put Only Few or no Restrictions On Buyer and Seller So We Can See That Clean Float Is A Result Of Free Market Economics Which Based On Forces Of Demand and Supply .

      Dirty Floatt :
      Means Floating Exchange Rate Based On Policy Of A Country's Monetary Policy Which The Country Uses It To Control On Its Currency Movements In The Foreign Exchange Market So In Dirty Float We Can See Central bank or Government intervention In Forex Market In order To Affect On Its Exchange Rate So That Way Is Called Dirty Float Or Managed Float .


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      Default Re: Clean float and dirty float: what are the meaning?

      Float implies that market or market forces are being driven by demand and supply. This is an established principle and all the buy and sell orders, technical analysis, fundamental analysis are in line with the principle. When the market forces flows normally according to this principle without any interruption or manipulation of any kind from anywhere, then it is referred to as Clean float. However in the situation where there are external influences or manipulation which could mostly by the government (through formulation of sudden policies) or some market movers, then it is referred to as dirty float


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      Default Re: Clean float and dirty float: what are the meaning?

      Let me start with a clean float, a clean float the fluctuations of currency value based purely on the supply and demand of the currencies in the forex market and without the interferences of Central banks And the government
      Ib a clean float the value of a currencies and depreciate and appreciate based on external factors like, economical and political factors.

      The dirty float is more of an opposite in meaning than the above explanation.
      The dirty float is a situation where the central banks and the government most time intervene in the movement of the currency and the value. Most time they do this to stabilize the economy in which the internal business will be the most beneficial because sometimes it will make it less difficult to perform international trade due to stable value of the currency.


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      Default Re: Clean float and dirty float: what are the meaning?

      A clean float actually occurs when the value of a currency or its exchange rate at a given time is determined purely by supply and demand available for it. The float is basically explained as the money in the banking system that is briefly counted twice due to delays in processing checks and can distort the money supply for the nation.

      While -

      A dirty float can be explained as a floating exchange rate where a country's central bank occasionally decides to make an intervention to change the direction of change of a country's currency value. In most cases, the central bank in a dirty float system acts as a buffer against an external economic shock that could be dangerous, Thus preventing its effects from disrupting to the domestic economy. A dirty float is also referred to as a "managed float.


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      Default Re: Clean float and dirty float: what are the meaning?

      Clean float is floating exchange rate system without government intervention so that in this case the government is not trying to stabilize foreign exchange rates.

      Dirty float is floating exchange rate system where there is still government intervention which acts as monetary authority through the market. In this case, the government is actively making efforts to stabilize foreign exchange rates.

      The use of floating exchange rate system can shake one country that is experiencing balance of payments deficit. However, on the other hand, it will benefit countries with balance of payments surplus because the increase in exports will also increase the exchange rate, whereas for countries with greater imports, they will reduce their exchange rates. To overcome this kind of thing, it is necessary to use foreign exchange supervision system by the government concerned.
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      Default Re: Clean float and dirty float: what are the meaning?

      Clean Float :- Its the type of floating system where there is no hand of the Government is there on buyers as well as sellers and the total process is done by the help of supply and demand .Here as there is no much measures of control ,there is possibility of high risk in such as the level of volatility is more compared to the other.

      Dirty Float :- Such types are done by the help of the Government as they are the deciders of such exchange systems so that tackling the depreciation as well the appreciation can be controlled in a greater way .Here the role of the Central bank also is there to regulate the fluccuations .


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      Default Re: Clean float and dirty float: what are the meaning?

      There are reasons why a government can decide to run based on a clean float or a dirty float, either of them is a control measure to ensure that the exchange rate is stable at every point in time depending on the circumstances that is prevalent at the time, clean float happens when the government does not intervene in the exchange rate policy but allow it to be determined by the forces of demand and supply, but in a dirty float regime, the government always makes some intervention to ensure that things don't spin out of control, the reason it does that is so that the economy can be stable under the system it wishes to operate on.


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