ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A currency peg is a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or basket of currencies. A currency peg can reduce uncertainty, promote trade, and boost economies.

Detailed explanation-2: -The exchange rate is also regarded as the value of one country’s currency in relation to another currency. For example, an interbank exchange rate of 129 Japanese yen to the United States dollar means that ¥129 will be exchanged for US$1 or that US$1 will be exchanged for ¥129.

Detailed explanation-3: -A pegged exchange rate, also known as a fixed exchange rate, is a currency regime in which the country’s currency is tied to another currency, usually USD or EUR.

Detailed explanation-4: -One such measure is devaluation. It means the value of one currency is reduced against another. We mustn’t confuse it with depreciation, even though both mean one currency loses value against another.