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Fixed Currency
(redirected from Pegged Currencies)

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Fixed Currency
A currency to which the government has linked the value of another currency or, rarely, 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 other currency (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.


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Even pegged currencies can expose executives to market fluctuations.
The pegged currencies cannot float freely on the foreign exchange market and their currency rates fluctuate in conjunction to the fluctuations of the base currency.
Market analyst Joseph Trevisani, speaking in Beirut last week, said the weaker euro offers expanded buying power for dollar pegged currencies, while putting a downward pressure on inflation.
 
 
 
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