Exchange Rate Regime
Exchange Rate Regime Meaning:
In foreign exchange terminology, an exchange rate regime generally refers to the policy imposed on a currency by its issuing country or by a trading bloc like the European Union, for example. Exchange rate regimes can include currency pegs, trading bands, and other more complex means of linking one currency to the value of another or to that of a basket of currencies.
In foreign exchange terminology, an exchange rate regime generally refers to the policy imposed on a currency by its issuing country or by a trading bloc like the European Union, for example. Exchange rate regimes can include currency pegs, trading bands, and other more complex means of linking one currency to the value of another or to that of a basket of currencies.
Perhaps the most notable example of an exchange rate regime in recent history was the Exchange Rate Mechanism or ERM of the European countries used to stabilize many currencies used within Europe prior to its replacement with the E.U.’s consolidated currency called the Euro at the start of 1999. Current examples of exchange rate regimes include the Chinese Yuan’s trading band versus the U.S. Dollar and the Hong Kong Dollar’s peg against the U.S. Dollar.