Currency exchange is just like any other transaction, right? Someone wants to buy dollars with Euros, someone else wants the inverse, and they trade. How would a government manage to effectively regulate all of that, when those transactions are happening all over the world?
In: Economics
You also have to consider that pegging currencies can be very easy or very hard depending on what the currencies are. If one country depends massively on another one (or on another one’s currency) for its economy, then keeping the currencies pegged will be very easy because it is highly unlikely that there will be a large demand or supply imbalance between the two currencies.
An example of an “easy” peg is the UAE dirham being pegged to the USD – the UAE economy depends on oil exports and oil is typically priced in dollars, so even without a peg you would expect an extremely strong correlation between the two currencies.
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