Currency Peg

AAA

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."
 

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Adjustable Peg

    An exchange rate policy adopted by some countries wherein the ...
  2. Currency Band

    A currency system that establishes a trading range that a currency's ...
  3. Currency History

    The historical values of a base currency in relation to the values ...
  4. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  5. Currency

    A generally accepted form of money, including coins and paper ...
  6. Currency Pair

    The quotation and pricing structure of the currencies traded ...
RELATED FAQS
  1. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Full Answer >>
  2. What risks does a Foreign Institutional Investor (FII) face?

    The term "foreign institutional investor" (FII) normally refers to large, non-Indian companies investing in Indian financial ... Read Full Answer >>
  3. What is the purpose of the International Monetary Fund?

    The stated goals of the International Monetary Fund include offering policy advice to member governments and central banks; ... Read Full Answer >>
  4. How often do exchange rates fluctuate?

    Exchange rates float freely against one another, which means they are in constant fluctuation. Currency valuations are determined ... Read Full Answer >>
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  2. Forex Education

    The Pros And Cons Of A Pegged Exchange Rate

    A pegged currency can give a country many advantages, but these advantages come at a price.
  3. Forex Education

    Drastic Currency Changes: What's The Cause?

    Currency fluctuations often defy logic. Learn the trends and factors that result in these movements.
  4. Forex Fundamentals

    Understanding the Floating Exchange Rate

    Floating exchange rate is the exchange rate between two currencies at any given time.
  5. Economics

    Volatility In The Yen Has Brought On Big Changes

    There's a difference between translation effects and the real effects that FX swings bring. We look at the difference, and how it's changing Japan.
  6. Economics

    Canadian Dollar Continues To Drop, But Why?

    The Canadian dollar-US dollar exchange rate is positively related to oil prices partly due to crude oil's big share of Canada's total FX currency earnings.
  7. Forex

    Main Factors That Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health, and can impact your returns.
  8. Forex Education

    Why China's Currency Tangos With The USD

    Investopedia explains: It takes two to tango, but unless both partners move in perfect cohesion, a sequence of graceful maneuvers can be reduced to a series of clumsy moves. The latter depiction ...
  9. Forex Education

    America's Loss Is The Currency Market's Gain

    The Smithsonian Agreement hurt the U.S. in the short-term, but was necessary in furthering real market-driven exchange rates.
  10. Forex Education

    A Primer On Currency Regimes

    Currency regimes are dynamic and complex, reflecting the ever-changing landscape of their respective nations' monetary and fiscal policies.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!