The aim of this paper is to evaluate the peak tracking method for determination of optical path difference of a fibre interferometer. This study narros the scope for Mach-Zehnder configuration with neutral white LED as its light source. The peak tracking method is then applied on the interference spectrum recorded from the output port of the interferometer using a spectrometer, allowing the optical path difference to be computed. Accuracy of this method is greatly affected by the wavelength resolution of the detector, where the uncertainty of the result is smaller with higher wavelength resolution and the maximum measurable path difference was found to be about 0.6 mm.