Exchange Rate Regime Classification

Steps:

• Identify key features: rate fixed against USD but within a narrow, adjustable band, implying some intervention.
• Recall fixed rates are rigidly pegged without variation.
• Recall floating rates fluctuate freely via market forces without bands.
• Match to managed float, where authorities intervene to stabilize within changing limits.

Why C is correct:

• Managed float involves central bank intervention to keep the exchange rate within a target band that can shift, matching the narrow but changing band against USD.

Why the others are wrong:

• A: Fixed rates are rigidly pegged to another currency without bands or changes.
• B: Floating rates are fully market-driven with no official maintenance or bands.
• D: Trade-weighted rates are indexes against a basket of currencies, not a single one like USD.

Final answer: C