Currency Peg

A currency peg is a policy that the government sets a fixed exchange rate for its currency against the value of another currency, only allowing it to fluctuate within a narrow range (normally between -1% to +1%).

Pegging a currency can stabilize global trade operations between countries and reduce the risk caused by exchange rate fluctuations of businesses. This policy is very helpful for countries with booming trade industries.

For example, China, the Bahamas and Marshall Islands all have pegged their currencies to the U.S. Dollar.