Adjustment

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An adjustment is a tool used by a central bank to influence its country’s currency exchange rate. This is used if the currency has a floating exchange rate (as opposed to some form of pegged exchange rate). Because it is most beneficial for foreign investment and trade when the exchange rate remains fairly stable, it can be in a country’s best interest to have a Manage Floating Exchange Rate to try to keep it constant with respect to its main trade and investment partners. However, when adjustment methods are not consistent this can be called dirty policy, and may decrease investor confidence and have long-term negative impacts on the exchange rate.
 
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