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The Economist economist

Why Currency Volatility Has Got Worse

The problems are exacerbated where a country has decided to peg its currency to another, such as the dollar or the euro. Denmark, which pegs its currency to the euro, has cut interest rates three times in recent weeks to discourage capital flows that might drive its currency higher. The Swiss, by contrast, abandoned their policy of capping the franc against the euro, which required them to buy increasing amounts of euro-denominated assets.


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