The currency rate that is allowed to fluctuate according to the market
Floating Exchange Rate allows a country monetary independence because it is not influenced directly by policies of another country, which would be the case for a Fixed Exchange Rate. If country A’s currency is “pegged” to country B’s (in the Fixed Exchange Rate scenario), then country B’s monetary policies would affect country A’s currency. Some countries use a “dirty” float in which the currency is allowed certain fluctuation within a range.
The viability of a currency market is based on the fact the rates are allowed to freely float and fluctuate according to market forces.
