Linked Exchange Rate
Linked Exchange Rate Meaning:
In foreign exchange terminology, a linked exchange rate refers to the policy imposed on a currency by its issuing country that usually involves linking the value of its currency to a major currency, such as the U.S. Dollar. Links can take the form of pegs, where the exchange rate fluctuations are very narrow, or wider bands.
In foreign exchange terminology, a linked exchange rate refers to the policy imposed on a currency by its issuing country that usually involves linking the value of its currency to a major currency, such as the U.S. Dollar. Links can take the form of pegs, where the exchange rate fluctuations are very narrow, or wider bands.
When it comes down to maintaining linked exchange rates, the responsibility usually falls on the country’s central bank which will intervene in the currency market as necessary to support the desired link. Linking exchange rates is often done to stabilize currency relationships between major trading partner countries and can also help a country to manage inflation.