what is a fixed exchange rate 
a fixed exchange rate is a regime applied by a government or central bank that ties the country s official currency exchange rate to another country s currency or the price of gold the purpose of a fixed exchange rate system is to keep a currency s value within a narrow band investopedia nono floresunderstanding a fixed exchange ratefixed rates provide greater certainty for exporters and importers fixed rates also help the government maintain low inflation which in the long run keep interest rates down and stimulates trade and investment most major industrialized nations have had floating exchange rate systems where the going price on the foreign exchange market forex sets its currency price this practice began for these nations in the early 1970s while developing economies continue with fixed rate systems 1from the end of world war ii to the early 1970s the bretton woods agreement meant that the exchange rates of participating nations were pegged to the value of the u s dollar which was fixed to the price of gold 2