What is one of the benefits of pegging a currency?

Pegging a currency offers several advantages, one of which is that it allows for easier cash forecasting for businesses. When a currency is pegged, its value is fixed to another stable currency (such as the US dollar), providing predictability in exchange rates. This stability helps businesses plan their budgets and forecast cash flows more accurately, as they can anticipate the costs associated with currency conversion without worrying about sudden fluctuations. Such predictability is particularly beneficial for companies engaged in international trade or those with overseas operations, as it reduces uncertainty related to exchange rate variations.

In contrast, the other options do not accurately reflect the outcomes of currency pegging. For example, pegging does not guarantee unlimited fluctuations; rather, it aims to stabilize currency value. It also does not eliminate political risks entirely, as factors aside from currency value can still impact a country's economic environment. Lastly, pegging a currency typically reduces volatility in exchange rates rather than increasing it, as the fixed exchange rate provides a buffer against sharp movements.