What Case Could Be Made for a Wider "Band" of Permitted

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The Answer is The case for a wider "band" of permitted exchange rate changes of the home currency against some foreign currencies (say 15 percent) compared to others (say 10 percent) could be based on the economic relationship and trade dynamics between the home country and the specific foreign currencies in question.

For example, if the home country has a strong and stable economic relationship with certain foreign countries, it may be beneficial to allow for a wider band of exchange rate changes to accommodate potential fluctuations in trade and investment. This could help to promote stability and flexibility in the exchange rate, which can be beneficial for businesses and investors operating in those markets.

On the other hand, a narrower band of permitted exchange rate changes against other foreign currencies may be justified if there are concerns about volatility or speculative activities in those markets. This could help to mitigate potential risks and maintain stability in the exchange rate for those specific currencies.

However, the case against this difference in width of permitted variations lies in the potential for discrimination and unequal treatment of different trading partners. Allowing for wider exchange rate changes for certain currencies while imposing stricter limits on others could be seen as unfair and could lead to tensions in international trade relations. It may also create opportunities for currency manipulation and unfair competitive advantages for certain countries.

Additionally, a wider band of permitted exchange rate changes for some currencies could lead to increased uncertainty and risk for businesses and investors, as they may struggle to predict and hedge against larger fluctuations in the exchange rate.

In conclusion, while there may be valid economic justifications for allowing different widths of permitted exchange rate changes for different currencies, it is important to carefully consider the potential implications for international trade relations, market stability, and fairness in the global economy. Any differences in permitted variations should be based on transparent and objective criteria, and should be carefully communicated and negotiated with trading partners to avoid potential conflicts and disruptions in the international financial system.

What Case Could Be Made for a Wider "Band" of Permitted

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What Case Could Be Made for a Wider "Band" of Permitted

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