Will currencies pegged to the US Dollar also see devaluation?

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There is so much talk these days, that USD is going to go down significantly, so my question is, if that happens what will be the impact on the currencies which are fully pegged with USD for example Saudi Riyal and UAE Dirham, will they see devaluation also.


Currencies that are fully pegged to USD will continue to buy the same amount of US dollars. So a peg, by definition, keeps the exchange rate fixed against the base currency, which in this case is USD.

Now USD has depreciated (went down as you said) significantly (about 10%) against Euro in the last one year. It has also depreciated against other major currencies such as pound, Swiss franc, Canadian dollar, etc. A dollar now buys less of these currencies.

So while a Saudi Riyal may buy the same amount of dollar, but as the dollar is buying less of euros, a Riyal will also buy less of euros or all other currencies against which the dollar has depreciated.

Answered by:
Dr. Rajesh Singh
Last updated on February 19, 2021