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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated January 16, 2021

What is Managed Currency?

Managed currency is the opposite of currency whose exchange rate is determined by the amount of supply and demand for the currency in the global marketplace. Most currencies, however, are managed by their central banks to some degree in order to achieve or maintain economic stability.

How Does Managed Currency Work?

Let's say Country X's currency is called the Widget. The Country X central bank does a lot of trade with Country Y, which uses the Gidget as its currency. The Country X central bank decides to manage its currency by setting the exchange rate at 5 Gidgets per Widget.

Country Y does not manage its currency. Accordingly, in Country Y, the number of Gidgets required to buy a Widget varies according to how much demand there is for Widgets and Gidgets.

Why Does Managed Currency Matter?

Managed currency is currency whose exchange rate is controlled by a central bank.
 

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