Pegged exchange rate

A pegged exchange rate is a system where a country's currency value is fixed or tied to another major currency, like the US dollar or the euro. This means that the country's central bank will maintain the exchange rate within a specific range to provide stability and predictability. For example, if a country's currency is pegged to the dollar, it will try to keep the exchange rate at a set level, such as 1 local currency unit to 0.50 dollars. This approach helps reduce volatility in trade and investment, fostering confidence in the economy.