fixed exchange rate

(redirected from Pegged currency)

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 ?
With a pegged currency, authorities must hold sufficient dollar buffers to maintain faith in the exchange rate, while ensuring steady inflows to keep coffers topped up.
Rather than outline specifics, the document speaks in a vague, somewhat harebrained tone: It doesn't contain any analysis of Qatari bond, derivative, or currency markets or an estimate of the total economic firepower the UAE can put behind the plan, nor does it address how much of Qatar's $68bn in outstanding debt the UAE and it allies already own; how to respond when, as is likely to happen relatively quickly in these lightly traded markets, the Qataris see strange trades and apply pressure to markets in the opposite direction by buying their bonds, stabilising their currency, and selling credit default swaps; or whether a successful attack on a pegged currency in the region will whip back and lead to pressure on the UAE dirham, the Saudi riyal, and the pegged currencies of their allies.
2002 -- The Cabinet took a historic decision on making the Kuwaiti Dinar a US Dollar pegged currency starting January 2003.
A pegged currency is not even the preferred plan for a Independent Scotland it is just one of a number of options.
The government of Denmark has repeatedly expressed its commitment to its pegged currency regime, confirming our view that the country will not join the eurozone in the next decade.
pegged currency, with rock bottom rates prevailing in the United States.
Bulgaria runs a pegged currency system which means its main tool for steering the economy is fiscal policy rather than interest rates, but inflation could turn into a headache for a government struggling to get consumers spending again.
Critics contend that, while it may have been appropriate for China during the early stages of its economic development to maintain a pegged currency, it is no longer so today, given the size of the Chinese economy and the impact its policies have on the world economy.
The FCA's analysis of the situation goes beyond the pricing factors to point out what it sees as an even wider-spread effect of the yuan-to-dollar pegged currency situation.
However, in the 12 countries that began 1997 with a floating exchange rate, currency depreciation had a significantly positive effect on stock returns, whereas the effect of depreciation on stock returns was negative and significant for the 13 countries that started the year with a pegged currency.