Answer: The purpose of floating exchange rate is to offer rates that adjust to current market conditions.
Explanation:
A floating interest rate, also called the adjustable or variable rate is a debt instrument such as mortgage, bond, loan or credit, which does not have a fixed interest rate over the life of the instrument.
Floating interest rates usually change based on the reference rate i.e. a benchmark of any financial factor like the consumer price index. London Inter-bank offered rate(LIBOR) is a common reference rates used as the basis for applying floating interest rates. LIBOR is the rate large banks use in lending to each other. The rate for such debt is usually called a margin or spread over the base rate.
