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I have very basic question about currency boards:

Assume that a country floats a new local currency "N" with the currency board model. It uses USD as the reserve currency. To begin with 1 N = 1 USD. The currency is fully backed by USD reserves. So when it issues x amount of "N" currency it buys and maintains x amount of USD.

Given this, my question in what circumstances would "N" vary in value against the USD?

Assume that the confidence the board does not reduce and neither does it ability to maintain USD reserves.

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