A currency peg is insulated from economic or political conditions, such that the exchange rate in the market will only change if the country's government breaks the peg and sets a new exchange rate.

Question

Quizplus · Accepted Answer

A currency peg can be influenced by economic and political conditions. For example, if a country's economy suffers a recession, the currency's peg may come under pressure if investors lose confidence in the country's ability to maintain the peg. Additionally, political instability or external pressures, such as changes in monetary policies in other countries, can also affect the currency's peg.

A Currency Peg Is Insulated from Economic or Political Conditions