when a country pegs its currency to the dollar it fixes the exchange at a set predetermined rate the value of the currency is maintained by the country s central bank since the dollar s value is on a floating rate it fluctuates this means that the pegged currency s value rises and drops with the dollar 
countries that peg their currency to the dollar do so because the u s dollar is the world s reserve currency and is relatively strong in the international market as such transactions and any international trade that takes place often happens in u s dollars this helps keep a country s pegged currency stable some countries peg to the dollar because it helps keep their currencies and therefore their exports priced competitively others do so because they are reliant on trade such as singapore and malaysia currencies pegged to the dollaras noted above the u s dollar is a popular currency that other countries use to peg their own currencies countries that choose to do so often have different reasons that are based on their own economies here are some of the most notable countries whose currencies are pegged to the greenback along with their rates options peggingthe buyer of a call option pays a premium to obtain the right to buy the stock underlying security at a specified strike price the writer of that call option meanwhile receives the premium and is obligated to sell the stock and expose themselves to the resulting infinite risk potential if the buyer chooses to exercise the option contract for example an investor buys a 50 call option which gives them the right to buy xyz stock at the strike price of 50 by june 30 the writer has already collected the premium from the buyer and would ideally like to see the option expire worthless stock price less than 50 at expiry the buyer wants the price of xyz to rise above the strike price plus the premium paid per share only at this level would it make sense for the buyer to exercise the option if the price is very close to the strike plus premium per share level just before the option s expiry date then the buyer and especially the writer of the call would have an incentive to be active in buying and selling the underlying stock respectively this activity is known as peggingthe converse holds true as well the buyer of a put option pays a premium to obtain the right to sell the stock at the specified strike price while the writer of that put option receives the premium and is obligated to buy the stock and expose themselves to the resulting infinite risk potential if the buyer chooses to exercise the option contract a lesser used definition of pegging occurs mainly in futures markets and entails a commodity exchange linking daily trading limits to the previous day s settlement price so as to control price fluctuations an investor buys a put option on xyz stock with a strike price of 45 that expires on july 31 and pays the required premium the writer receives the premium and the waiting game begins the writer wants the price of the underlying stock to remain above 45 minus the premium paid per share while the buyer wants to see it below that level again if the price of xyz stock is very close to this level then both would be actively selling and buying to try to influence xyz s price to where it would benefit them while this concept of pegging could apply to both it is used predominantly by sellers as they have a bit more incentive to not see the option contract exercised 