Intervention and Pegged Exchange Rates Interest rate parity exists and will continue to exist. The one-year interest rate in the United States and in the eurozone is 6 percent and will continue to be 6 percent. Assume that Denmark’s currency (called the krone) is currently pegged to the euro and will remain pegged to the euro in the future. You expect the ECB to engage in direct intervention by using euros to purchase a substantial amount of U.S. dollars in the foreign exchange market over the next month. Assume that this direct intervention is expected to be successful at influencing the exchange rate.
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