Due to interventions and restrictions on the foreign exchange market under the pegged regime, the exchange rate fails to affect policy variables such as interest rates.
Because of the dollar's extraordinary strength, the central bank has been forced to burn through a trillion dollars in foreign exchange reserves to maintain its peg.
He called the practice of pegging a "special foreign exchange mechanism" that would be abandoned "sooner or later".
He called China's practice of pegging the renminbi to the dollar a "special foreign exchange mechanism" made to respond to the world financial crisis.
All Gulf currencies, except the Kuwaiti dinar, are pegged to the dollar, and new currency issues carry foreign exchange risk.
The Hong Kong Monetary Authority, which maintains the currency peg, also has one of the world's largest hoards of foreign exchange.
On Tuesday, the United States Treasury made the most stinging official attack so far on China's foreign exchange policy in a report that warned China to revalue its yuan -- pegged at 8.28 to the dollar.
Today, America is economically less dominant and foreign exchange markets are more powerful, so the life expectancy of a state-administered fixed-peg system would be correspondingly shorter.
Some suggest the Swiss ought to announce a peg to the euro or engineer a negative nominal interest rate.Rather than buying foreign exchange, policymakers can keep it out of the country, sequestering it abroad like a non-native species.
Managing a peg and establishing a credible Lender of Last Resort means accumulating a large pile of foreign exchange reserves.
The administration is asking the Japanese to stop intervening in the foreign exchange market to slow the fall of the dollar against the yen, and the Chinese to loosen their peg of the Chinese yuan to the dollar.
