Pegged Currency

Pegged Currency is a monetary system where a currency's value is fixed relative to another asset, such as another currency, commodity, or basket of goods. This system helps stabilize exchange rates and manage economic fluctuations. For example, stablecoins in the crypto world are often pegged to the U.S. dollar, ensuring their value remains consistent. Pegged currencies provide predictability and can foster trade by eliminating exchange rate volatility. However, maintaining a peg can be challenging and may require significant foreign reserves or intervention to uphold the fixed rate.