(Source: http://www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/fixed-pegged-exchange.asp) A fixed exchange rate system maintains fixed exchange rates between currencies; those rates are referred to as official parity. A nation with fixed exchange rates must enforce those rates. An early form of fixed exchange rates was to specify the value of a nation's currency in terms of gold (the "gold standard"). The Gold Standard The gold standard system worked reasonably well during the 1800s, but it was gradually disbanded during the twentieth century. In 1944, leading non-communist nations agreed on a fixed exchange rate system (the Bretton Woods System) whereby the value of the U.S. dollar was pegged at $35 per ounce and other nations then fixed the value of their currencies in relation to the U.S. dollar. Private individuals could not acquire gold at that price; only governments traded gold at that price. During the 1960s, the U.S. government purs...
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