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The price at which one currency exchanges for another is called foreign exchange rate.
In the UK there are three possible foreign exchange rate regimes. They are:
– Fixed exchange rate
– Flexible (or floating) exchange rate
– Managed exchange rate
Under a fixed exchange rate regime, the value of the pound would be pegged by the Bank of England. Under a flexible exchange rate regime, the value of the pound would be determined by market forces with no intervention by the Bank of England. Under a managed exchange rate regime, the Bank of England would intervene in the foreign exchange market to smooth out fluctuations in the value of the pound but it would not seek to maintain the pound at an absolutely constant value for a long period of time.
Flexible Exchange Rate
Managed Exchange Rate
Fixed Exchange Rate
Foreign Exchange Rate Regimes