What are the Advantages of a Floating Exchange Rate?

-Fixed Exchange Rates require Central Banks to have Foreign Currency Reserves to Maintain the Exchange Rate. A Floating does not need such a Requirement -Floating Exchange Rate can Reduce the BOP Current Account Deficit. A BOP Deficit will lead to the Fall Value of the Currency so if Demands for Exports and Imports are Price Elastic, Exports will Increase and Imports will Decrease which Reduces the BOP Deficit -Floating Exchange Rate means Governments don't have to use Monetary Policy to help Maintain the Exchange Rate. Can be used for Other Objectives