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Question
Which country follows a fixed exchange rate system?
Which country follows a fixed exchange rate system?
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Solution
The correct option is A Cuba
In a fixed rate system, the price of the domestic currency in international markets is purely determined by the central bank of the country. It is not allowed to appreciate and depreciate as per the market conditions, the central bank will intervene using forex reserves and hold the exchange rate at the pegged amount The Banco Central De Cuba does intervene in the forex market for the Cuban peso and it is classified as a fixed currency.
In a fixed rate system, the price of the domestic currency in international markets is purely determined by the central bank of the country. It is not allowed to appreciate and depreciate as per the market conditions, the central bank will intervene using forex reserves and hold the exchange rate at the pegged amount The Banco Central De Cuba does intervene in the forex market for the Cuban peso and it is classified as a fixed currency.
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