Currency Band

AAA

DEFINITION of 'Currency Band'

A currency system that establishes a trading range that a currency's exchange rate can float between. A currency band represents the price floor and ceiling within which the price of a given currency can trade, and is like a hybrid of a fixed exchange rate and a floating exchange rate. The currency band restricts how much the price can move relative to a reference currency or currencies.

INVESTOPEDIA EXPLAINS 'Currency Band'

If the value of the currency begins trading outside the band, then the country of that currency will usually revert to a fixed exchange rate. This usually stabilizes the currency's price back within the band. The Chinese yuan is an example of a currency that moves within a currency band.

RELATED TERMS
  1. Currency Peg

    A country or government's exchange-rate policy of pegging the ...
  2. Spot Next

    A term used in foreign-currency trading. "Spot next" denotes ...
  3. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  4. Currency

    A generally accepted form of money, including coins and paper ...
  5. Currency Option

    A contract that grants the holder the right, but not the obligation, ...
  6. Nonconvertible Currency

    Any currency that is used primarily for domestic transactions ...
Related Articles
  1. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. Forex: Wading Into The Currency Market
    Forex Education

    Forex: Wading Into The Currency Market

  3. The Currency Board: Understanding The ...
    Personal Finance

    The Currency Board: Understanding The ...

  4. Top 7 Questions About Currency Trading ...
    Forex Education

    Top 7 Questions About Currency Trading ...

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center