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What is an Adjustable peg? Effect of Forex Market

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what is adjustable peg
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An adjustable peg is an exchange rate regime in which a country’s exchange rate is fixed in relation to another currency but can change over time. 

The base currency is USD, so you may say that country’s exchange rate is fixed with respect to USD. 

The adjustable peg system has roots connected to the United Nations Monetary. Earlier we have gold as currency. The Bretton Woods agreement integrated the currencies to the price of gold and the US dollar was considered a reserve currency tied to the gold.
 
In order to stay away from volatility, most western European countries fixed their currency with respect to US dollars.
 
This agreement got void between 1968 and 1973 overvaluation of the US dollar raised concerns about gold prices.
President Richard Nixon requested that the dollar’s convertibility be temporarily suspended. Except for the price of gold, countries were free to choose any exchange agreement.

Final Words on Adjustable Peg

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Sometimes nations do this to avoid volatility Since Volatiy is a significant topic in international business management. 

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Rupay Rajat
Rupay Rajat

Rupay Rajat is a financial and investing blog. I write about financial instruments and the stock market in the most easiest language.

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