Currency Peg
a.k.a. Peg, Pegged exchange rate
A policy of fixing a currency's value to another currency, a basket or gold, defended by the central bank.
A currency peg nails one currency to another. Hong Kong keeps its dollar in a tight band against the US dollar; Denmark keeps the krone close to the euro. The central bank buys or sells its currency to hold the line.
Pegs bring stability, until they break. If markets doubt a central bank has enough reserves, speculators attack. When the Swiss National Bank abandoned its euro cap in January 2015, the franc leapt so violently that some brokers were wiped out.
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