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Fixed Exchange Rate
(redirected from Fixed exchange rates)

   Also found in: Wikipedia 0.01 sec.
Fixed exchange rate
A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.

Fixed Exchange Rate
An exchange rate for a currency where the government has decided to link the value to another currency or to some valuable commodity like gold. For example, under the Bretton Woods System, most world currencies fixed themselves to the U.S. dollar, which in turn fixed itself to gold. A government may fix its currency by holding reserves of the peg (or the asset to which it is fixed) in the central bank. For example, if a country fixes its currency to the British pound, it must hold enough pounds in reserve to account for all of its currency in circulation. Importantly, fixed exchange rates do not change according to market conditions. It is also called a pegged exchange rate.

fixed exchange rate
An exchange rate between currencies that is set by the governments involved rather than being allowed to fluctuate freely with market forces. In order to keep currencies trading at the prescribed levels, government monetary authorities actively enter the currency markets to buy and sell according to variations in supply and demand. Compare floating exchange rate. See also devaluation.


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In 1971, when the "buy and sell" method shifted from fixed exchange rates to floating ones, at that time, an inter-bank market took place which in today''s time we know as FOREX or FX or Foreign Exchange Market.
Expectations that Gulf countries will reform fixed exchange rates has mounted in the past week after the UAE central bank governor said he could track a basket of currencies in concert with Gulf neighbours to help contain inflation.
The Chinese were not the only country to do this; from the end of World War II until 1970, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.
 
 
 
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