fixed exchange rates

A fixed exchange rate is when a country's government or central bank sets and maintains a specific value for its currency relative to another currency or a basket of currencies. This means the country commits to buying or selling its currency at that fixed rate to keep it stable. To do so, they hold reserves of the other currency and intervene in the foreign exchange market when needed. Fixed rates help promote stability and make international trade and investment more predictable, but they require constant management and can be vulnerable if economic conditions change unexpectedly.