fixed exchange rate

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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.
References in periodicals archive ?
Year-over-year revenue for the third quarter rose by 15 per cent at fixed exchange rates and operating profit was SEK 342 M (298).
Percentage change compared to the same quarter in the preceding year at fixed exchange rates for comparable units.
STOCKHOLM, Sweden -- Year-over-year revenue for the fourth quarter rose 14 per cent at fixed exchange rates to SEK 1,412 M (1,321).
FAGERSTA, Sweden -- * Year-over-year revenue for the third quarter rose 10 per cent at fixed exchange rates and 7 per cent overall.
Second quarter revenue rose 9 per cent year-over-year and 7 per cent at fixed exchange rates.
Revenue rose by 12 per cent at fixed exchange rates and 20 per cent in SEK, amounting to SEK 1,416 M (1,179).
Invoicing and operating profit for the full year 2005 reached an all-time high, rising 10 percent at fixed exchange rates to SEK 4,936 M (4,333).
Tariffs are not acceptable today, but many countries have fixed exchange rates at low levels to stimulate their exports.
Onex has elected to satisfy the principal amount with Celestica subordinate voting shares based upon the fixed exchange rates provided for under the terms of the debentures.
The precise time at which this occurs depends on 1) the government's rule for abandoning fixed exchange rates, and 2) the government's new monetary policy.
Such a view must have seemed then like an academic curiosity, the academy said, because at the time all countries were linked together by fixed exchange rates within the so-called Bretton Woods System.
Global growth rates are considerably slower in the 1980s and the 1990s--decades of free market globalization--than in the period from the 1950s to the 1970s, an era of mixed economic systems and fixed exchange rates.

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