A managed exchange rate, also known as a dirty float, is a system where a currency’s value is mostly decided by the market. However, the government or central bank steps in when necessary to prevent the currency from becoming too strong (appreciation) or too weak (depreciation).

Key features include:

• It is not fully fixed, but it does not float completely freely either; market forces set the rate while the government acts as a stabilizer.
• Central banks manage the rate by buying or selling their foreign exchange reserves.
• It is used to prevent extreme price swings while keeping the trust of international markets.
• Authorities may maintain a specific target range or band that they try to defend.
• This method is common among large economies, as even nations with floating currencies occasionally intervene.

The managed float is different from a pure float because authorities actively try to influence the price. It is also different from a fixed rate because the government chooses when to intervene, rather than being forced to do so by set rules.