Exchange Rate Mechanism - ERM

AAA

DEFINITION of 'Exchange Rate Mechanism - ERM'

An exchange rate mechanism is based on the concept of fixed currency exchange rate margins. However, there is variability of the currency exchange rates within the confines of the upper and lower end of the margins. This currency exchange rate mechanism is also commonly called a semi-pegged currency system.

INVESTOPEDIA EXPLAINS 'Exchange Rate Mechanism - ERM'

The most notable exchange rate mechanism was the one that was in effect in Europe. The goal of the European Exchage Rate Mechanism was to reduce exchange rate variability and achieve monetary stability in Europe prior to the introduction of the single currency - the euro - on January 1, 1999.

RELATED TERMS
  1. European Currency Unit - ECU

    The European Currency Unit (ECU) was the precursor to the Euro, ...
  2. Personal Finance

    All financial decisions and activities of an individual, this ...
  3. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
  4. Prime Rate

    The interest rate that commercial banks charge their most credit-worthy ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Pegging

    1. A method of stabilizing a country's currency by fixing its ...
Related Articles
  1. Forex Education

    The Impact Of Currency Conversions

    Will a rising or falling dollar hurt you or your company? In this article we explore the impact of currency converisons on consumers, comanies, and countries.
  2. Options & Futures

    Exploring Non-Dollar Currencies For Forex Trading

    Learn how investments in foreign currencies can diversify your portfolio.
  3. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  4. Investing

    How To Trade Foreign Stocks

    We weigh the major ways to trade foreign stocks for investors.
  5. Economics

    Asian LNG Prices: Not Likely To Rise Anytime Soon

    Asian LNG prices could stay low for an extended period of time, due to low oil prices, less demand and new LNG-producing projects on various continents.
  6. Investing Basics

    Here's How To Tap International Markets

    Access to foreign markets has grown a lot in recent years, allowing US market players to trade these bourses in real-time.
  7. Stock Analysis

    3 Things I Learned From lululemon Athletica's 10-K

    Lululemon athletica has emerged not only as one of the nation's fastest-growing retailers, but also as one of the market's favorite growth stocks.
  8. Stock Analysis

    Energy Transfer Partners' Mexican Ambitions

    There has been a lot of talk over the past year or so about America's enticing ability to export natural gas to global markets
  9. Stock Analysis

    What’s The Smartest Way To Play Tobacco Stocks?

    While the United States economy continues to grow, the U.S. tobacco industry keeps shrinking.
  10. Economics

    Sectors Hit by Sanctions on North Korea

    We look at the sectors most affected by the US sanctions imposed against North Korea.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center