6 ms·

Unless the peg breaks, the currency doesn't "slide."

jacquesm 4y ago
The peg usually is in the period just before the switch to the euro, if the period is longer then invariably the peg breaks and the local currency will slide, sometimes quite a bit in a very short period.
- tokai 4y ago
  The DKK has been pegged to the euro since '99. The rate has changed by 0.03 over the last 15 years.
  - jacquesm 4y ago
    Yes. But Denmark could have easily joined in all those years, they chose not to and that's their right. But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (Poland, Bulgaria, Romania, and to a lesser extent Hungary and Czechia). Denmark negotiated an exception and the fact that in 22 years it hasn't made any difference in terms of valuation means that they simply missed out on some international commerce.
    - tokai 4y ago
      All that is besides the point. The issue was if a peg can be indefinitely - and it can.
    - _Tev 4y ago
      > But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (... Czechia) ČNB actually intentionally weakened CZK in 2013 and for several years after. And in the long term CZK appreciates against EUR rather than the opposite. "struggling to keep parity" is just not true.
- qwytw 4y ago
  > The peg usually is in the period just before the switch to the euro > if the period is longer then invariably That totally incorrect for most currencies in the countries which joined the EU in 2004 or later. The Croatian Kuna was never free floating and pegged to the Euro/DM since it was introduced 1994.
secondcoming 4y ago
IIRC, in the case of Poland people had mortgages pegged to the Swiss Franc. A central bank can only peg to one currency.
- jacquesm 4y ago
  Depended on the bank. Quite a few in Euros, some in other currencies, even USD. But if you wanted your mortgage in Zloty then suddenly the interest was twice as high.
  - landemva 4y ago
    Hmmm so banks offered a choice to be a forex speculator, and some took the lower interest rate bait. The risk is dramatic forex moves which make it near impossible to make payments.
  - int_19h 4y ago
    It makes sense that a currency that is more likely to lose value within the term of the loan would lead to a higher interest rate, no?

The peg usually is in the period just before the switch to the euro, if the period is longer then invariably the peg breaks and the local currency will slide, sometimes quite a bit in a very short period.

tokai 4y ago
The DKK has been pegged to the euro since '99. The rate has changed by 0.03 over the last 15 years.
- jacquesm 4y ago
  Yes. But Denmark could have easily joined in all those years, they chose not to and that's their right. But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (Poland, Bulgaria, Romania, and to a lesser extent Hungary and Czechia). Denmark negotiated an exception and the fact that in 22 years it hasn't made any difference in terms of valuation means that they simply missed out on some international commerce.
  - tokai 4y ago
    All that is besides the point. The issue was if a peg can be indefinitely - and it can.
  - _Tev 4y ago
    > But for countries struggling to keep parity with the Euro today being in the Euro would have immediate advantage (... Czechia) ČNB actually intentionally weakened CZK in 2013 and for several years after. And in the long term CZK appreciates against EUR rather than the opposite. "struggling to keep parity" is just not true.
qwytw 4y ago
> The peg usually is in the period just before the switch to the euro > if the period is longer then invariably That totally incorrect for most currencies in the countries which joined the EU in 2004 or later. The Croatian Kuna was never free floating and pegged to the Euro/DM since it was introduced 1994.

secondcoming 4y ago

IIRC, in the case of Poland people had mortgages pegged to the Swiss Franc. A central bank can only peg to one currency.

jacquesm 4y ago
Depended on the bank. Quite a few in Euros, some in other currencies, even USD. But if you wanted your mortgage in Zloty then suddenly the interest was twice as high.
- landemva 4y ago
  Hmmm so banks offered a choice to be a forex speculator, and some took the lower interest rate bait. The risk is dramatic forex moves which make it near impossible to make payments.
- int_19h 4y ago
  It makes sense that a currency that is more likely to lose value within the term of the loan would lead to a higher interest rate, no?