Fixed (pegged) exchange rate

Definition

A fixed or pegged exchange rate is a system in which a country's government or central bank sets and maintains an official exchange rate relative to a foreign currency or a basket of foreign currencies. Under this system, the value of the domestic currency is tied to the value of another country's currency, gold, or another measure of value.

Related terms

Currency Devaluation: A deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies, or standard.

Foreign Exchange Reserves: Assets held on reserve by a central bank in foreign currencies, used to back liabilities and influence monetary policy.

Balance of Payments:

A record of all transactions made between entities in one country and the rest of the world over a defined period, including trade in goods and services, capital transfers, and investments