• Pegging is a way to control the exchange rate of the national currency by linking it to the currency of another country.
  • Many countries are stabilizing their currencies by pegging them to the US dollar, which is considered the world’s most stable currency.
  • Currencies pegged to the US dollar include the Belize dollar, the Hong Kong dollar and the United Arab Emirates dirham.
  • Pegging currencies can help expand trade and raise real incomes, but can also lead to chronic trade deficits.
  • Pegging is also an illegal strategy used by some buyers and sellers (sellers) of call and put options to manipulate their price.