Glossary

A currency peg is an exchange rate regime in which a country’s currency is maintained with margins of +/- 1 percent vis-à-vis another currency or a basket of currencies. There is usually no commitment to keep the parity irrevocably. To sustain a currency peg, the central bank uses direct intervention such as the sale or purchase of foreign exchange in the market, or indirect intervention via the use of interest rate policy or foreign exchange regulations.