Pegged Currency
| A pegged currency is a currency that is linked to another currency, group of currencies, or other monetary indexes. The purpose of this link is to keep the exchange rate between the two currencies stable. This stability is important for countries that have a lot of trade with each other, as it makes it easier to predict prices and plan for economic growth. There are a few different ways that a country can peg its currency. The most common is to link it to the US dollar. This is because the US dollar is the most traded currency in the world, and it is also the currency that is used in most international transactions. Other countries may link their currency to a basket of currencies, which is a group of currencies that are weighted according to their importance. This basket can be made up of any currencies, but it is usually made up of the currencies of the country's major trading partners. There are also some countries that link their currency to an index, such as the Consumer Price Index or the Producer Price Index. |
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