Clean Float

A clean float, also known as a pure or free float, refers to a foreign exchange system where a country’s currency value is determined entirely by market forces, without direct government or central bank intervention. In this system, the currency’s exchange rate is influenced by supply and demand in the forex market. Countries with a clean float allow their currency to fluctuate freely, driven by economic factors such as trade, inflation, and interest rates. Most developed economies, like the U.S. and Eurozone, follow this approach.

Example

The U.S. dollar operates under a clean float system, where its value fluctuates based on factors such as interest rates, inflation, and international trade, without direct government intervention to stabilize it.