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What is a currency peg? How fixed exchange rates work

By SendPay Business · · 2 min read

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A currency peg is when a country fixes its currency's exchange rate to another currency, usually the US dollar or the euro, instead of letting the market set it freely.

Real examples

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Tap each one to see what it means.

Saudi riyal

fixed at 3.75 to the US dollar.

UAE dirham

fixed at 3.6725 to the US dollar.

Hong Kong dollar

kept between 7.75 and 7.85 to the US dollar.

Danish krone

held close to a central rate against the euro.

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How a peg is held

The central bank buys or sells its own currency, using its foreign currency reserves, to keep the rate where it wants it. It may also move interest rates in step with the currency it is pegged to.

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When a peg breaks

If the reserves run low or the cost of holding the peg gets too high, a central bank may let it go. In January 2015 the Swiss National Bank dropped its cap on the franc against the euro, and the franc jumped sharply within minutes.

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Where SendPay fits

SendPay platforms include GBP, EUR and USD accounts and currency exchange under your own brand, powered by licensed partners.

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SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.

Questions people ask

Where does a pegged currency sit in its band?

Check the Hong Kong dollar, riyal, dirham or krone.

Currency peg calculator →
What is a stablecoin?

A crypto coin pegged to a currency.

What is a stablecoin? →
Why do exchange rates move?

Interest rates are a big driver.

Interest rates and exchange rates →
What is the mid-market rate?

The benchmark rate with no mark-up.

What is the mid-market rate? →

Read next

Spotted a mistake or something out of date? and we'll fix it. How our guides are made

This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.