Explain the concept of pegged exchange rate
Introducing Exchange Rates. In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. Learning Objectives. Explain the concept of a foreign exchange market and an exchange rate. Key Takeaways pegged float exchange rate: Explain the so-called "Balance of payments" (BoP) concept and how it relates to the foreign-exchange ("forex") market under: a) a floating-rate regime; and b) a so-called "pegged"-rate regime. Many developing countries, such as China, prefer a pegged rate - how does this limit their economic policy options, especially in dealing with problems such as inflation?