Floating Currency

A floating currency is a type of currency whose value is determined by the market forces of supply and demand rather than being fixed to another currency or commodity, like gold. This means that the exchange rate can fluctuate freely based on economic factors like inflation, interest rates, and political stability. For example, if a country's economy is strong and attracts investment, its currency value may rise. Conversely, if the economy weakens, the currency may fall. Most major currencies, like the US dollar and euro, operate on a floating exchange rate system.