adjustable peg

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A system where countries stabilize their exchange rates around par values that they retain the right to change. Under this system a country undertakes to intervene in the foreign exchange market to keep its currency within some margin, for example 1 percent, of some given exchange rate parity, the ‘peg’. The country retains the right to adjust the parity, that is, to move the peg. This was more or less the case under the Bretton Woods system in the 1950s and 1960s. This system provides opportunities for speculators at times when it appears that the peg is going to have to move, but has not yet done so.

Subjects: Economics.

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