Title: Top Exchange Rates Pegged to the U.S. Dollar
Headings: Top Exchange Rates Pegged to the U.S. Dollar
Top Exchange Rates Pegged to the U.S. Dollar
Key Takeaways
What Does Pegging Mean?
Bretton Woods Agreement
Fixed vs. Floating Currencies
Why Currencies Peg to the U.S. Dollar
Major Fixed Currencies
The Bottom Line
Article Sources

Content: Major currencies, such as the Japanese yen, euro, and the U.S. dollar, are floating currencies—their values change according to how the currency trades on foreign exchange or forex (FX) markets. This type of exchange rate is based on supply and demand. This rate is, therefore, determined by market forces compared to other currencies. Any changes in currency pricing point to strength in the economy, while short-term changes may point to weakness. 2 ﻿
Fixed currencies, on the other hand, derive value by being fixed to another currency. Most developing or emerging market economies use fixed exchange rates for their currencies. This provides exporting and importing countries more stability, and also keeps interest rates low. 2 ﻿
Why Currencies Peg to the U.S. Dollar
Countries have different reasons for pegging to the dollar. Most of the Caribbean islands—Aruba, Bahamas, Barbados, and Bermuda, to name a few—peg their currencies to the U.S. dollar because their main source of income is derived from tourism paid in dollars. 3 ﻿﻿ 4 ﻿ Fixing to the U.S. dollar stabilizes their economies and makes them less volatile.