A currency peg is a country or government’s exchange-rate policy of attaching, or pegging, the central bank’s rate of exchange to another country’s currency. Also referred to as a fixed exchange rate or a pegged exchange rate, currency pegs stabilize the exchange rate between countries, which allows for accurate long-term predictability for business planning and can anchor rates at advantageous levels for large importers.

Countries commonly peg their currencies to the currencies of others, most often the U.S. dollar or the euro. Currency pegs add predictability between trading partners and can remain in place for decades, such as the linkage of the Hong Kong dollar to the U.S. dollar, which has remained steady since 1983; Denmark’s peg of the kroner to the euro since 1982 is another notable example.