Pegged rates are also susceptible to speculative attack, whereas a floating rate can adjust more smoothly to market forces.
She also introduced a floating exchange rate regime and lifted controls on currency trading.
It is more flexible (with a floating exchange rate) and its central bank is still soundly run.
By devaluing a currency in a floating exchange rate environment, the result is that trade booms and foreign reserves balloon.
However, in 1971 under President Richard Nixon, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime.
One big difference is that Australia, unlike the East Asians before their currencies plunged, has a floating exchange rate which can adjust smoothly to market pressures.
But a floating-rate system is not a free lunch either.
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Argentina is yet another country which has exchanged instability in its nominal economy, with a floating exchange rate, for instability in its real economy with a fixed exchange rate.
It carries a floating interest rate which is currently at about 1.75%, well below the 5.2% average rate on commercial-construction loans by U.S. banks in the fourth quarter, according to Trepp LLC.
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The three key elements of this policy remained the adoption of a floating exchange rate system, the anchoring of monetary policy to the inflation target and the acceleration of banking sector reforms, he said.
In a typical interest-rate swap, one party agrees to exchange a fixed-rate obligation with another that has a floating, or variable, rate exposure.
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In developing countries with immature financial markets, a freely floating exchange rate may not be sensible because a small number of foreign-exchange trades can cause big swings in currencies.
The paradox is that part of the euro's purpose is to re-empower the European electorate by equipping the EU with a currency strong enough to challenge the rule of the tiny group of foreign-exchange dealers who, in a floating exchange-rate regime, can settle the fate of national economic policies.
"In a high-net-worth portfolio, the floating rate element is typically cash, " says Andrew Marshak, a managing director in Credit Suisse Asset Management's Credit Investment Group.
Typically, one series of cash flows would be considered the fixed leg of the agreement while the other would be less predictable, such as cash flows based on an interest rate benchmark or a foreign exchange rate, usually referred to as the floating leg.
The BOE, with a strong pound and a mortgage market that is almost entirely floating rate, is expected to go higher still, showing the Fed stimulative by contrast.
The company estimates that the savings from interest payments -- a big chunk of the borrowings carry floating-rate terms -- would make up for the foregone profits from the sold assets.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
Investors who like the idea of floating-rate funds but not bank loans have a few other options.
Floating rate funds have been around for more than a decade.
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"We have had a tough year, but through stringent fiscal policy, the new floating exchange rate regime, and extensive structural reforms, we have come out of intensive care unit, " Mr Dervis said.
This exchange rate liberalization has continued and while the ruble is not a freely floating currency, it is much closer to being one that it was in the past.
Floating-rate securities, securities with puts, securities where, if certain things happened, a sinking fund kicked in.
Floating-rate funds come in three varieties: open-end, closed-end and a hybrid of the two.
On floating-rate debt, the yields can adjust and allow investors to get paid more in a rising-rate environment.
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For one thing, it is hard to know how much companies have in fact lengthened the maturity of their debts because the interest-rate swap market allows them to swap those fixed bond payments into cheaper floating debt, a popular strategy in the investment-grade market.
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