Concept

Currency basket

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Fixed exchange rate system

A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold. There are benefits and risks to using a fixed exchange rate system. A fixed exchange rate is typically used to stabilize the exchange rate of a currency by directly fixing its value in a predetermined ratio to a different, more stable, or more internationally prevalent currency (or currencies) to which the currency is pegged.

Exchange rate regime

An exchange rate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors, such as economic scale and openness, inflation rate, the elasticity of the labor market, financial market development, and capital mobility. There are two major regime types: Floating (or flexible) exchange rate regime exist where exchange rates are determined solely by market forces and often manipulated by open-market operations.

Icelandic króna

The króna ˈkhrouːna or krona (sometimes called Icelandic crown; sign: kr; code: ISK) is the currency of Iceland. Iceland is the second-smallest country by population, after the Seychelles, to have its own currency and monetary policy. Like the Nordic currencies (such as the Danish krone, Swedish krona and Norwegian krone) that participated in the historical Scandinavian Monetary Union, the name króna (meaning crown) comes from the Latin word corona ("crown").

Balance of payments

In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a quarter or a year) and the outflow of money to the rest of the world. These financial transactions are made by individuals, firms and government bodies to compare receipts and payments arising out of trade of goods and services.

Currency board

In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target. In colonial administration, currency boards were popular because of the advantages of printing appropriate denominations for local conditions, and it also benefited the colony with the seigniorage revenue.

Floating exchange rate

In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange market events. A currency that uses a floating exchange rate is known as a floating currency, in contrast to a fixed currency, the value of which is instead specified in terms of material goods, another currency, or a set of currencies (the idea of the last being to reduce currency fluctuations).

Devaluation

In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation. A monetary authority (e.g.

Canadian dollar

The Canadian dollar (symbol:

; code: CAD; dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign

. There is no standard disambiguating form, but the abbreviations Can

, CA

and C

are frequently used for distinction from other dollar-denominated currencies (though C

remains ambiguous with the Nicaraguan córdoba). It is divided into 100 cents (¢). Owing to the image of a common loon on its reverse, the dollar coin, and sometimes the unit of currency itself, may be referred to as the loonie by English-speaking Canadians and foreign exchange traders and analysts.

Managed float regime

Managed float regime is an international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies to maintain a certain range. The peg used is known as a crawling peg. In an increasingly integrated world economy, the currency rates impact any given country's economy through the trade balance. In this aspect, almost all currencies are managed since central banks or governments intervene to influence the value of their currencies.

Renminbi

The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China. It is the 5th most traded currency as of April 2022. The yuan ( or ) is the basic unit of the renminbi, but the word is also used to refer to the Chinese currency generally, especially in international contexts. One yuan is divided into 10 jiao (), and the jiao is further subdivided into 10 fen (). The renminbi is issued by the People's Bank of China, the monetary authority of China.