DEFINITION of 'Clean Float'

Also known as a pure exchange rate, a clean float occurs when the value of a currency, the exchange rate, is determined purely by supply and demand. Clean floats can only exist where there is no government interference, as would be the case in a purely capitalistic economy. Clean floats are a result of Laissez-Faire or free market economics.

BREAKING DOWN 'Clean Float'

A clean float is the opposite of a dirty float, which occurs when government rules or laws affect the pricing of currency. Virtually none of the currencies in the western world float cleanly, without support or some other form of relationship with a central bank. Swiss francs, German marks and Canadian dollars tend to be among the "cleanest" of the western currencies.

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