Currency Band

When countries don’t want their currency to jump up (hyperinflation) or down (hyperdeflation) in extremes, they might set a currency band. A currency band is literally a “band” (although no match for the Stones) with a ceiling price and a floor price. The currency can “float” free as a bird between the floor and ceiling prices...but it cannot go above the ceiling price or below the floor price. So it’s kinda fixed, but kinda floating.

Often, a currency band is pinned to another reference currency. In today’s world, many currencies are pinned to the US dollar, but that may start to change as the rest of the world starts making more money.

Countries use currency bands and pin their currencies to other stable reference currencies to keep their own currency stable. If the currency starts trying to float out of the currency band, the country might use central bank tactics, or revert back to Plan B: a fixed currency rate.