<p>Correct, both a fixed exchange rate and a manipulated exchange rate involve the government setting this price. In BOTH cases it is usually implemented by promising to standing ready to buy or sell any amount at the fixed price. Of course, countries don't always have enough foreign cash to sell it at the promised price, nor do they always want to buy as much as the markets sell to them</p>

<p>The difference is, as you suggest, whether the trading partners (the US is usually the one that labels others manipulators) conclude that the exchange rate is fixed at a too depreciated level. This level keeps foreign goods cheap in the US and US goods expensive in the foreign country. </p>

<p>Also, a fixed exchange rate is often set at a lvel that seems "too high", the only question being whether the government will manage to keep it so high, since it creates an incentive for its citizens to buy foreign goods. Instead a manipulated currency is deemed to be "too low". </p>

CC BY-SA 3.0
2016-07-28T03:06:39.293Z
2016-07-28T03:06:39.293Z
Fix.B.
<p>China is labelled by some to be a 'currency manipulator', that is supposedly pegged to the US Dollar. What is the difference between currency manipulation and a fixed regime?</p>

<p><strong>Different motives?</strong>
I figure that it may be that a textbook fixed regime is undertaken to prevent instability, and is minor (just to correct volatility), whereas manipulation is done with the aim of gaining an unfair advantage.</p>

<p><strong>Different means?</strong>
I have also read that it could be due to the fact that a manipulator creates domestic base money with which it can buy currency, without sterilisation.</p>

<p><strong>Legality?</strong> BVJ below makes an interesting comment about the legality of the two... is there a <em>legal framework</em> in which some forms of fixed currency maintenance are allowed and some not?</p>

<p>Could anyone please clarify? Thanks.</p>

CC BY-SA 3.0
2015-04-20T12:09:32.083Z
I think that fixed currency is usualy done through legal means, defining the exchange to some level and forcing the currency to be traded in a certain way. Whereas curency manipulation is done by market mechanisms like controling investment or leveraging taxes. Though It might be just the case of the examples I can think of fixed and manipulated exchange.
BVJ
CC BY-SA 3.0
2015-04-20T19:28:53.987Z
Hey @BVJ - many thanks for the comment- this sounds as if it could very much be the difference. Are there any legal frameworks, that mean that some fixed regimes are permitted (i.e. by WTO) and others not?
Ag3nt
<macroeconomics><currency><exchange-rates>
What is the difference between currency manipulation, and a fixed exchange rate regime?
Ag3nt
# What is the difference between currency manipulation, and a fixed exchange rate regime?

(Asked by: username_0 on 2015-04-19)

China is labelled by some to be a 'currency manipulator', that is supposedly pegged to the US Dollar. What is the difference between currency manipulation and a fixed regime?

**Different motives?**
I figure that it may be that a textbook fixed regime is undertaken to prevent instability, and is minor (just to correct volatility), whereas manipulation is done with the aim of gaining an unfair advantage.

**Different means?**
I have also read that it could be due to the fact that a manipulator creates domestic base money with which it can buy currency, without sterilisation.

**Legality?** username_1 below makes an interesting comment about the legality of the two... is there a *legal framework* in which some forms of fixed currency maintenance are allowed and some not?

Could anyone please clarify? Thanks.

**Tags:** macroeconomics, currency, exchange-rates

> **Comments:**
> **username_1**: I think that fixed currency is usualy done through legal means, defining the exchange to some level and forcing the currency to be traded in a certain way. Whereas curency manipulation is done by market mechanisms like controling investment or leveraging taxes. Though It might be just the case of the examples I can think of fixed and manipulated exchange.  
> **username_0**: Hey @username_1 - many thanks for the comment- this sounds as if it could very much be the difference. Are there any legal frameworks, that mean that some fixed regimes are permitted (i.e. by WTO) and others not?  

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## 1 answers

### Answer by username_2 on 2016-07-28. Score: 0 | Accepted answer

Correct, both a fixed exchange rate and a manipulated exchange rate involve the government setting this price. In BOTH cases it is usually implemented by promising to standing ready to buy or sell any amount at the fixed price. Of course, countries don't always have enough foreign cash to sell it at the promised price, nor do they always want to buy as much as the markets sell to them

The difference is, as you suggest, whether the trading partners (the US is usually the one that labels others manipulators) conclude that the exchange rate is fixed at a too depreciated level. This level keeps foreign goods cheap in the US and US goods expensive in the foreign country.

Also, a fixed exchange rate is often set at a lvel that seems "too high", the only question being whether the government will manage to keep it so high, since it creates an incentive for its citizens to buy foreign goods. Instead a manipulated currency is deemed to be "too low".


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