Currency Peg

A currency peg, sometimes referred to as a [[Fixed exchange rate|fixed exchange rate]], is a kind of exchange rate policy wherein a country’s domestic currency is only allowed to fluctuate within a narrow range (usually between -1% to +1%) against the value of another currency.

Currency pegging is usually done by countries who wish to stabilize their global trade operations. By using a currency peg, [[Risk|risk]] caused by exchange rate fluctuations of businesses involved in international trade is reduced. This kind of exchange rate policy is very useful for countries with robust trade industries.

China, the Bahamas, and Marshall Islands have pegged their currencies to the U.S. dollar; Niger and Senegal to the French franc; and Bangladesh, Czech Republic and Thailand to a basket of several select currencies.

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