Currency Peg


DEFINITION of 'Currency Peg'

A country or government's exchange-rate policy of pegging the central bank's rate of exchange to another country's currency. Currency has sometimes also been pegged to the price of gold.

Also known as a "fixed exchange rate" or "pegged exchange rate."

BREAKING DOWN 'Currency Peg'

Currency pegs allow importers and exporters to know exactly what kind of exchange rate they can expect for their transactions, simplifying trade. This in turn helps to curb inflation and temper interest rates, thus allowing for increased trade.

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