A currency peg is a government policy where a country fixes or nearly fixes its currency's exchange rate to another stronger currency, typically the US dollar.
The main objectives are bringing exchange rate stability, controlling inflation, and boosting investor confidence.
Maintaining a currency peg requires the central bank to intervene in the market using foreign currency reserves. There are two types: Hard Peg (strictly fixed, like a currency board system) and Soft Peg (currency can fluctuate within a defined range).
Bangladesh uses a 'managed float' system, where the taka's value partly depends on the market but Bangladesh Bank intervenes when necessary to maintain stability.