Title: Dollar Peg: Definition, How It Works, Why It's Done
Headings: The Dollar Peg, How It Works and Why It's Done
World Economy Trade Policy
The Dollar Peg, How It Works and Why It's Done
Why Countries Peg Their Currency to the Dollar
How It Works
Example of a Fixed Exchange Rate
Why Countries Peg Their Currency to the Dollar
Key Takeaways
Article Sources

Content: Twenty-five countries peg their currency to it. The 19 eurozone members use it as their currency. 3 ﻿
How It Works
A dollar peg uses a fixed exchange rate. A country's central bank promises to give you a fixed amount of its currency in return for a U.S. dollar. The country must have lots of dollars on hand to maintain this peg. As a result, most of the countries that use a U.S. dollar peg have significant exports to the United States. Their companies receive lots of dollar payments. They exchange the dollars for local currency to pay their workers and domestic suppliers. Central banks use the dollars to purchase U.S. Treasurys. They do this to receive interest on their dollar holdings.