Currency pegging is a kind of fixed exchange rate which pursues a exchange rate policy which is only permitted to fluctuate inside a narrow range (usually between -1% to +1%) against the value of another currency.
Currency pegging is usually utilized by countries who want to stabilize their worldwide currency operations. Countries can easily manage their currencies and its related risk through using a currency peg currency exchange system. Fluctuations can be easily controlled through reducing currency fluctuations in international trade is reduced. This type of exchange rate policy is very pivotal and useful for countries with high earning trade industries.
China, Marshall Islands and Bahamas have pegged their currencies to the United States dollar. In addition, Niger and Senegal have also pegged their currencies to French franc. Moreover, Bangladesh, Thailand and Czech Republic to a basket of various selected currencies.