Joint Float

AAA

DEFINITION of 'Joint Float'

Two or more countries agreeing to keep their currencies at a same exchange rate relative to one another, but not relative to other countries. The countries involved in a joint float agreement form a sort of partnership where their currencies move jointly. The central banks of the countries participating in this agreement maintain the joint float by buying and selling each others currencies.


INVESTOPEDIA EXPLAINS 'Joint Float'

Countries that decide to link their currencies do it for various reasons. For example, a small country next to a larger one will be affected more severely by currency exchange rates. In this case, a minimal shift from one currency to another will impact the price of the currency in the smaller country more than it would impact the larger country. The goal is that if the countries form a joint float by linking their currencies to form a fixed exchange rate, their currencies become stronger and better able to withstand currency fluctuations. West Germany, France, Italy, the Netherlands, Belgium and Luxembourg created a European joint float in 1972.

RELATED TERMS
  1. Float

    Money in the banking system that is briefly counted twice due ...
  2. Currency Peg

    A country or government's exchange-rate policy of pegging the ...
  3. Exchange Rate Mechanism - ERM

    An exchange rate mechanism is based on the concept of fixed currency ...
  4. Foreign Currency Effects

    The gain or loss on foreign investments due to changes in the ...
  5. Fixed Exchange Rate

    A country's exchange rate regime under which the government or ...
  6. Crawling Peg

    A system of exchange rate adjustment in which a currency with ...
Related Articles
  1. Why China's Currency Tangos With The ...
    Forex Education

    Why China's Currency Tangos With The ...

  2. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  3. Using Interest Rate Parity To Trade ...
    Options & Futures

    Using Interest Rate Parity To Trade ...

  4. Taking Advantage Of Central Bank Interventions ...
    Forex Education

    Taking Advantage Of Central Bank Interventions ...

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