Adjustable Peg


DEFINITION of 'Adjustable Peg'

An exchange rate policy adopted by some countries wherein the national currency is largely pegged or fixed to a major currency such as the U.S. dollar or euro, but can be readjusted from time to time within a narrow interval. The periodic adjustments can are usually intended to improve the country's competitive position in the export market.

BREAKING DOWN 'Adjustable Peg'

Following the adoption of the Bretton Woods system in 1944, most Western European nations pegged their currencies to the U.S. dollar, until 1971.

The Chinese renminbi or yuan was informally pegged to the US dollar in the mid-1990s until 2005 at a rate of approximately 8.28 per dollar. The peg was adjusted to about 6.83 yuan per U.S. dollar from July 2008, after three years of appreciation.

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