Parity

In reference to a monetary unit, par or parity is the amount of precious metal, gold or silver, which has been officially designated as the legal equivalence of the monetary unit.

In reference to foreign exchange, par or parity is the official or established ratio between the amount of a precious metal, usually gold, which is the legal equivalent of the monetary unit of one country and the amount of the same precious metal which is the legal equivalent of the monetary unit of another country. For example, the British pound sterling in 1949 was legally defined as the equivalent of 2.8 times the amount of gold that was the then legal equivalent of the American dollar. So the par or parity for the pound sterling was then stated as $2.80.