Clean Float

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
  2. Check

    A written, dated and signed instrument that contains an unconditional ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Dirty Float

    A system of floating exchange rates in which the government or ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
RELATED FAQS
  1. What percentage of a company's float can be shorted?

    The quick answer is that the amount of shares shorted can actually exceed 50% of the float in a company. The percentage of ... Read Full Answer >>
  2. How does online banking assist with budgeting?

    Setting up online banking can make a personal budget easier to manage through the use of multiple accounts or expense categories ... Read Full Answer >>
  3. What exactly is a company's float?

    The term "float" refers to the regular shares that a company has issued to the public that are available for investors to ... Read Full Answer >>
  4. What risks does a Foreign Institutional Investor (FII) face?

    The term "foreign institutional investor" (FII) normally refers to large, non-Indian companies investing in Indian financial ... Read Full Answer >>
  5. What is the purpose of the International Monetary Fund?

    The stated goals of the International Monetary Fund include offering policy advice to member governments and central banks; ... Read Full Answer >>
  6. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  2. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  3. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  4. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  5. Budgeting

    When Good People Write Bad Checks

    Overdraft protection can help when you overestimate your balance, but it will cost you.
  6. Economics

    Volatility In The Yen Has Brought On Big Changes

    There's a difference between translation effects and the real effects that FX swings bring. We look at the difference, and how it's changing Japan.
  7. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  8. Economics

    Canadian Dollar Continues To Drop, But Why?

    The Canadian dollar-US dollar exchange rate is positively related to oil prices partly due to crude oil's big share of Canada's total FX currency earnings.
  9. Forex

    What Is Online Trading Academy?

    Online Trading Academy educates individuals about stocks, forex, futures and options as well as investment strategies based on the student’s trading style.
  10. Forex Education

    Understanding The Spread in Retail Currency Exchange Rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!