And floating and fixed exchange rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).

First, the spread between banks borrowing rate and the zero risk rate has been climbing since July.

Thus, the exchange rate regime in Latin America today is one of actively managed floating.

Interest rate cuts can boost borrowing and thus spending on investment and consumption.

There are a number of schemes floating around for leveraging Germany s lower borrowing costs to help its partner countries, beyond simply expanding the ECB s balance sheet.

But the continuing success of the floating exchange rate system does not imply a smooth ride in 2011.

Managing a floating rate has also allowed Latin American countries to accumulate a significant level of international reserves.

Nearly all mortgages have floating rates that vary with the five year loan rate set by the People s Bank.

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways. Thus, the exchange rate regime in Latin America today is one of actively managed floating.

First, China needs capital controls to retain monetary policy independence until it is ready to adopt a floating exchange rate regime.

Coming from different experiences, most countries converged on the adoption of a floating exchange rate, many in the context of inflation targeting.

The floating exchange rate system works surprisingly well, but currency volatility and unpredictability look likely to remain an enduring constant in 2011 and beyond.

Floating point exception

Interest rate spreads for Italy and Spain are widening again, while borrowing costs for Portugal and Greece remained high all along.

BEIJING On October 26, the renminbi s spot exchange rate against the US dollar reached the upper limit of its floating range for the second consecutive trading day.

Me was a floating head.

Floating market, Colombo, Sri Lanka.

By the lone stars floating ,

Farmers and wholesalers gather in several floating markets in a region that resembles the floating market of Thailand.

Seeking to boost economic growth, the authorities may soon destroy their one great advantage the low rate of interest on government debt and private borrowing.

Indeed, a third lesson is that neither hard pegs nor unfettered floating facilitate the preservation of a competitive real exchange rate, which is crucial to promoting and sustaining economic development.

The effect of quantitative easing on exchange rates between the dollar and the floating rate currencies is a predictable result of the Fed s plan to increase the supply of dollars.

Earlier, in 2009, the BRSA adopted another important measure that barred households from borrowing in foreign currency, thus sparing them the effects of exchange rate volatility.

This level of protection would induce them to invest their money only if the borrowing country offered a reasonable, limited interest rate premium over safe assets.

With floating exchange rates, it is not.

Turned to dust , floating in the air ,

Turned to dust , floating in the air ,

Conversely, the fall in savings in the US is largely due to higher borrowing by the young (rather than a fall in middle aged Americans savings rate).

Another implication of this view is that the steep rise in savings in China is largely driven by a rise in the savings rate of middle aged Chinese (rather than a fall in the borrowing rate of the young).

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways.

At the macro level, a less credit constrained economy (with a large mass of effective borrowers) could then experience a fall in the savings rate as borrowing rose.

So that they will become floating dust particles .

So that they will become floating dust particles .

This partly reflects borrowing cost differentials. If the local interest rate is 17 per year and the dollar interest rate is 2 , it still makes sense to borrow in dollars as long as the domestic currency is expected to depreciate 15 or less.

They got little babies in there, floating in there.

Sami's lifeless body was floating in the swimming pool.

But flexibility is not a synonym for pure floating.

A common application is removing oil floating on water.

These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25 , which would be below market rates available to Airbus without government support.

These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25 , which would be below market rates available to Airbus without government support.

But the banks are profitable ongoing enterprises in the current low interest rate environment, because they typically engage in short term borrowing and longer term lending at higher rates, with leverage.

Sami was always borrowing money.

Possibilities for outside commercial borrowing

Shamsheer writes in Somewhereinblog about the floating markets he visited

The basis for continued rapid economic development has been established, and there is nothing to suggest the possibility of significant change in inflation targets, in the autonomy of the central bank, or in the floating exchange rate.