fixed exchange rate investment & finance definition
An exchange rate that is set by the central bank or
governmental monetary authorities. This is in contrast to floating exchange
rates that are determined by the market. One country that uses a fixed exchange
rate is China, which pegs its yuan to the U.S. dollar.
See fixed exchange rate in Wall Street Words
An exchange rate between currencies that is set by the governments involved rather than being allowed to fluctuate freely with market forces. In order to keep currencies trading at the prescribed levels, government monetary authorities actively enter the currency markets to buy and sell according to variations in supply and demand. Compare
floating exchange rate. See also
devaluation.
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