How to fix exchange rate?

A fixed or pegged exchange rate system is a monetary policy tool employed by governments to stabilize the value of their national currency. This is achieved through the intervention of the central bank, which acts as the primary regulator of the country's monetary system.

In this system, the value of the domestic currency is tied or "pegged" to another major global currency, such as the U.S. dollar, euro, or yen. This relationship is established and maintained by the government's central bank.

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The primary objective of a pegged exchange rate is to reduce uncertainty in international trade and investment by providing a stable and predictable exchange rate. This, in turn, fosters economic growth and promotes foreign investment.

To maintain the pegged rate, the central bank engages in active market intervention. This involves buying and selling its own currency in the foreign exchange market to ensure that the exchange rate remains within a narrow band around the target rate.