Fixed and Floating Currency Exchange Rates and Their Benefits


If you are wondering if fixed currency exchange rates is better than floating currency exchange rates, then the answer to that question will depend on you and what type of benefits you like better. Fixed and floating currency exchange rates actually come with their own great benefits. Today, we will be discussing some benefits to fixed currency exchange rates and some benefits to floating currency exchange rates. The question “which one is really better?” will really depend on you. So here are some benefits to fixed and floating currency exchange rates.


  1. One really great benefit that fixed currency exchange rates from can provide is certainty. Certainty about what your countries currency exchange rate will be compared to the rest of the worlds. This is true because fixed currency exchange rates focuses on keeping the currency rates at a consistent level, not allowing the currency rates to get higher or lower. It will just stay in one level. This is actually a great benefit in so many ways. You will always know the exchange rate and won’t need to worry about always keeping up with the currency exchange rates anymore because you know that it is basically always the same. Also, fixed currency exchange rates can constrain the government from making policies for currency exchange rates that pursue extreme and irresponsible economic policies. These are the top 2 benefits of fixed currency exchange rates.


  1. However, floating dollar to rand exchange rates also have their benefits. Floating currency exchange rates are when the currency rate changes consistently. One benefit to floating currency exchange rates is that it can really protect you from external shocks. If for example, you purchase oil from another country and then suddenly the oil price of that country has shockingly increased. You will have to pay extremely high for that oil already if you have fixed currency exchange rates. However, with floating currency exchange rates you can wait until your country’s currency raises then the oil from that other country won’t be as expensive anymore. This is really a very beneficial as it will really reduce the negative impact on any type of external shock. Another benefit that we will be talking about is the opposite of the second benefit to fixed currency exchange rates; and this benefit is that you will have lack of policy constraints. The government can change the policies of currency exchange rates with floating currency exchange rates. The government can pursue policies that are appropriate for helping and improving the domestic economy.

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