Limited Flexibility Float (LimitedFlexibility) What is a Limited Flexibility Float A limited flexibility float is an forex trading site forextradingwebsiteonline approach in which a countrys monetary authority allows the market exchange rate to float within a range of forextradingbrokerwebsite parity on the basis of a currency parity between the local currency cashback forex a particular currency or currencies Limited Flexibility Float forms The main forms of limited flexibility float exchange rates are single A single-fixed limited flexible floating exchange rate and a joint floating exchange rate: A single-fixed limited flexible floating refers to a countrys monetary authority by setting a currency parity between the local currency and a certain currency to be fixed, and allows the actual exchange rate to float freely against the currency parity within a certain range of exchange rate way single-fixed limited flexible exchange rate only in a few developing countries, most of the single-fixed U.S. dollar, floating range is generally the currency parity The use of a single pegged limited floating exchange rate increases the range of exchange rate fluctuations between the local currency and the pegged currency, but in general the range of exchange rate fluctuations is still strictly controlled Joint floating exchange rates, also known as adjustable central exchange rate system, mainly refers to the European Economic Community member states in accordance with the European Monetary Union plan to implement adjustable pegged exchange rates between the currencies of member states within the Union, and In the 1970s, with the collapse of the Bretton Woods monetary system, the European Economic Community (EEC) countries adopted in 1971 a plan to reduce international exchange rate fluctuations on the regional economies of member countries, to promote the flow of goods and capital in the region, and to promote the goal of economic integration in Western Europe. According to the plan to establish the European Monetary Union according to which the European Community established the European Monetary Cooperation Fund and the European Currency Unit, and in April 1972 began to implement the joint floating of member countries currency exchange rates In accordance with the provisions of the agreement, the six countries of the Western European Community, including West Germany, France, Belgium, the Netherlands, Luxembourg and Italy, which participate in the joint floating, the currencies of member countries to implement the stare-down under the prescribed currency parity between The agreement provides for a collective floating exchange rate, with the exchange rates of the six countries participating in the joint float not to fluctuate by more than ±1.125% of the then published parity with the U.S. dollar. This creates a narrower floating range for the regional monetary union, within the range of ±2.25% of the IMFs parity with the U.S. dollar. The six countries of the European Community collectively float their exchange rates within a narrow range, like a snake marching in a tunnel, so the joint float is also known as the snake float to the end of November 1996, six more countries, including Austria, Denmark, Ireland, Portugal, Spain and Finland, joined the joint float, and the scope was further expanded to 12 countries to jointly float the mechanism for the birth of the European currency has accumulated experience and laid the foundation for the future Comparison of limited flexible floating and fixed floating exchange rate Compared with the fixed floating exchange rate, under the limited flexible floating exchange rate, the national monetary authorities also set the currency parity, but the market exchange rate can float around the currency parity in a relatively large range, so as to reflect the supply and demand of foreign exchange to a greater extent at the same time, with the foreign currency parity can maintain the basic stability of the exchange rate, reduce foreign exchange risk, and promote foreign trade and economic cooperation Development
