In economics, a dual exchange rate is the occurrence of two different values of a currency for different sets of monetary transactions.
Due to the devaluation of the pound around the 1970s and the collapse of the Bretton Woods system, many developed countries switched to floating exchange rates.
[6] With the structural adjustment to international trade that has occurred since the mid-1980s, especially the deepening of trade reform, Latin American countries have begun gradually abandoning multiple exchange rate systems, favoring instead the implementation of single exchange rate systems.
From 1981 to 1985, during a period of Chinese economic reform, China formally implemented a dual exchange rate system.
[10] Dual exchange rates are oftentimes used to stabilize currency values when countries face financial crises.
Countries implementing such systems typically put any exchange controls on the market for financing current transactions.
Such an event can lead to the emergence of black markets and arbitrage from individuals seeking to make capital gains.