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 ?
During the early 1990's, the recommendation of the International Monetary Fund, the World Bank and analysts was to lower inflation by pegging the exchange rate, like Argentina had done.
Additionally, his continuation of a longstanding policy of pegging the exchange rate of the currency, the rial, to the dollar has driven up imports and crippled domestic manufacturers.
Pegging the exchange rate does not guarantee price stability.
I conclude that pegging the exchange rate does not guarantee price level stability in the long run.
In pegging the exchange rate, policymakers fix the value of the domestic currency to the currency of a large country, usually the main trading partner.
AB was told that the radicals and socialists in the Cabinet swayed Abacha into pegging the exchange rate of the naira at N22=$1 instead.
The market knows that pegging the exchange rate ultimately is a conditional commitment.
dollar in tandem with the colon, pegging the exchange rate at 8.