Fixed vs Floating Exchange Rates (and Currency Pegs)

By Today's Currency Rates · Updated June 20, 2026

Not every currency is set the same way. Some float freely, their value drifting up and down with the market every second. Others are deliberately pinned to another currency, or steered within limits by their central bank. Knowing which system a currency uses explains a lot about how its rate behaves.

Floating rates

A floating currency takes whatever value the market gives it. Supply and demand move it continuously, and no authority commits to holding it at a particular level. Most of the world’s major currencies — the US dollar, euro, British pound, Japanese yen, Swiss franc, Australian dollar — float. Their rates can drift gently or swing sharply depending on interest rates, data and sentiment, which is why pairs like USD to EUR never sit still for long.

The advantage is flexibility: a floating rate can absorb economic shocks on its own. The trade-off is unpredictability, both for businesses and for anyone planning a trip.

Fixed and pegged rates

A fixed or pegged currency is held at a set value against another currency (or sometimes a basket of currencies). The central bank maintains the peg by buying and selling its own currency, and by holding reserves of the anchor currency to back it up.

Several Gulf currencies are pegged to the US dollar, giving them very stable day-to-day values against the dollar. The Hong Kong dollar is a well-known example of a peg with a defined band — it’s kept within a narrow range around a target value rather than at a single fixed point, with the authorities stepping in at the edges of the band.

The appeal of a peg is stability and predictability, which can help trade and investment. The cost is that the country gives up some control over its own monetary policy, since defending the peg can constrain what it does with interest rates.

Managed floats

In between sit managed floats (sometimes called “dirty floats”). The currency mostly moves with the market, but the central bank intervenes occasionally to smooth out sharp swings or lean against a move it considers excessive. Many currencies that aren’t strictly pegged still get this kind of light-touch steering. The result is a rate that’s market-driven most of the time, with a hand on the tiller now and then.

What a peg means for you as a traveller

A pegged currency is genuinely convenient: the headline rate barely moves, so the mid-market rate you check before you fly is likely to be much the same when you land. There’s no need to agonise over timing.

But — and this matters — a stable mid-market rate does not mean a good deal at the counter. The provider’s margin and fees still apply, and they can be just as large as on a floating currency. With a peg, watch the spread, not the trend. The number that varies between providers is their markup, not the underlying rate.

Pros and cons at a glance

Neither system is “better” — they suit different priorities. What’s worth remembering is that the system sets how much the rate moves, while the provider sets how much you pay on top. For more, browse our currency guides.

Rates on this site are indicative mid-market reference rates (ECB for fiat, CoinGecko for crypto) and are for information only — confirm the exact rate with your provider before you transact.