Dollar Peg
A fixed exchange rate policy where a country ties its currency value to the US dollar.
Definition
A dollar peg is a monetary policy where a country fixes its currency's exchange rate to the US dollar at a specific ratio. Countries peg their currencies to promote trade stability, attract foreign investment, and control inflation. The central bank maintains the peg by buying or selling its own currency in foreign exchange markets and holding large US dollar reserves. Notable dollar-pegged currencies include the Hong Kong dollar (pegged since 1983), Saudi riyal, and UAE dirham. Stablecoins like USDT and USDC also maintain a dollar peg. Pegs can break under extreme economic pressure — the Thai baht's peg collapse in 1997 triggered the Asian financial crisis.
Related Terms
Exchange Rate
The price of one currency expressed in terms of another currency.
ForexForex (Foreign Exchange)
The global decentralized market for trading currencies, the largest financial market in the world.
ForexUS Dollar Index (DXY)
A measure of the value of the US dollar relative to a basket of six major foreign currencies.
CryptoStablecoin
A cryptocurrency designed to maintain a stable value by pegging to a reserve asset like the US dollar.