fixed exchange rate

(redirected from Pegged rate)

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 ?
In a consultation report published in January 2013, the IMF suggested the introduction of open market instruments (repo and reverse repo) to manage liquidity so that QCB can actively maintain the interbank rate in line with the policy rate, particularly with QAR's strong commitment to a US dollar pegged rate.
Such regime exerts pressures on Oman's monetary policy framework to maintain the pegged rate and to manage domestic liquidity.
That means that the Swiss will defend the pegged rate of exchange by printing enough francs to offset the inflows of euros.
With a pegged rate, the monetary base contains both domestic and foreign components.
Forward yuan-dollar exchange rates are consistent with this: The three-month forward rate recently climbed back close to the pegged rate, and the two-year forward rate is now pricing in a 6.
Thus, governments are not prevented from backing out of the pegged rate nor does the pegged rate prevent the exchange rate from collapsing (Sachs, 1999).
According to Steve Hanke, the pegged rate of the Rupiah, which is one of the fundamentals of the CBS, is better than the free floating rate as recommended by the IMF or the managed floating rate which Indonesia once adopted.
Finally, countries with significant degrees of exchange rate flexibility have behaved with real responsibility, keeping money growth low and inflation under control, even without the straitjacket of a pegged rate or dollarization.
The Bank of England's Monetary Policy Committee (MPC) pegged rates at a record low of 0.
The Bank of England's Monetary Policy Committee pegged rates at a record low of 0.
The Bank's Monetary Policy Committee have pegged rates at 0.
The Bank of England pegged rates for the fourth month in a row as it kept a watchful eye on inflationary pressures triggered by the rapid rise in energy bills.