Exchange Rate Regime

An exchange rate regime is the set of rules a country's authorities apply to the price of their own currency: whether the rate is left to the market, held at a declared value, allowed to move inside a stated band, or adjusted on a published schedule. The regime is declared by the central bank or the finance ministry and is a matter of public policy rather than market convention, so it is something to be looked up rather than inferred. It is also the single fact that explains most of how a pair behaves on a screen. A currency left to trade freely produces continuous two-way quotes and wide participation; one held at a declared value spends long stretches barely moving and does most of its moving when the policy itself changes; one subject to controls may not be quotable outside its own jurisdiction at all. The IMF classifies each member's arrangement and central banks publish their own descriptions, so the regime behind any pair can be read from a primary source.