Single Currency Peg

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Single Currency Peg

An exchange rate for a currency whose value the government has decided to link to another currency, as opposed to a currency basket or a commodity like gold. For example, under the Bretton Woods System, most world currencies fixed themselves to the U.S. dollar, forming a single currency peg across most of the world. Under a single currency peg, a government must hold enough reserves of the peg 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.