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 ?
Although the fixed exchange rate made imports cheap, it caused a constant flight of dollars out of the country and a shrinking of industrial infrastructure, leading to job losses.
The study, conducted by Arbah Financial Company, attributed the local factors to the increase in demand due to lavish government spending and to the large size of credit extended to the private sector while the foreign factors are caused by what it called "imported inflation" for which the fixed exchange rate of the riyal against the dollar was responsible in addition to the rising costs of commodities in the countries of origin.
Five of the six countries covered by HSBC's quarterly Gulf business confidence survey maintain a fixed exchange rate to the US dollar, which has fallen almost 20pc against the euro since the start of 2007.
The discussion of monetary policy and capital flows almost inevitably begins with the well-known trilemma, the observation that a country can choose no more than two of the following three features of its policy regime: (1) free capital mobility across borders, (2) a fixed exchange rate, and (3) an independent monetary policy.
Heavy intervention was witnessed in the beginning of 1973 by developed economies to smoothly shift from the Bretton Woods fixed exchange rate system to free float.
Pursuant to the merger agreement, shareholders of Dow received a fixed exchange rate of 1.
South Sudan floated the fixed exchange rate in December 2015 and there is no official foreign currencies rate set by the government since then.
JEDDAH: Saudi Arabia is committed to keeping the riyal pegged to the US dollar and that it has "sufficient tools" to support its fixed exchange rate policy, said Ahmed Al-Kholifey, governor of Saudi Arabian Monetary Agency (SAMA), on Friday.
The bank said that it is committed to keep the riyal pegged to the US dollar and that it had 'sufficient tools' to support its fixed exchange rate policy.
Al-Khalifi said that SAMA has already emphasized on different occasions to continue its policy of the current exchange rate of Saudi Riyal, and that it has sufficient tools to support SAR exchange rate, noting that this adopted policy of a fixed exchange rate since more than three decades has been and still remains as an important pillar in supporting the Kingdom of Saudi Arabia's economy.
Bulgaria operates a fixed exchange rate mechanism called currency board, which curbs the conduct of independent monetary policy by the country's central bank and the pegs the national currency, the lev, at 1.

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