When there is a drop or rise beyond the assigned value of a peg, the Central banks trade or purchase it in the market. Since the value of both are subject to changes frequently, the central banks or the Government makes efforts to fix a standard rate of exchange between the two countries involved. Foreign Currency is the one used outside a country for monetary exchange. ![]() This is also called as the Primary Currency. Domestic Currency is a medium of transaction within a country. Pegging is the process of setting a fixed rate of exchange for a currency with that of another. The process is called Pegging and this is a significant aspect in forex trading. A fixed rate is assigned to the domestic currency in exchange with a foreign one in order to bring better stability and simplify trading between countries. ![]() The rise and fall in the rate determine the supply and demand for the Exports and Imports of a country, adding values to its revenue. The value of currency undergoes fluctuations depending on the internal and external affairs of a country.
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