What is the criteria to value a currency. On what basis is it decided that an Euro is around 55 INR ?
2006-07-19 07:57:07 · 4 answers · asked by TheWowGuy 1 in Business & Finance ➔ Other - Business & Finance
Money is traded on the world markets just like oil, wheat, curry powder or metals. The relative value of any currency depends on what those in the market for the currency think it will buy at any one time.
For example, if one American dollar will buy one gallon of oil, then you have a standard for how much a Euro or rial or rupee is worth in comparison. In this completely hypothetical example (since oil is about 80 American dollars at the moment), if you could buy a gallon and a half with a Euro, or just one cup with some other kind of money, you would instantly know the relative value of each currency.
These values usually change every day. There are various currency marketplaces around the world where people constantly buy and sell in large amounts. Your example of one Euro to 55 INR may change to 60 INR a day from now, or drop to 51 INR. There are many web sites that daily post the different "exchange rates" for money, and of course you can also read the daily rates in the financial pages of a daily newspaper.
2006-07-19 08:07:08 · answer #1 · answered by Der Lange 5 · 0⤊ 0⤋
The market decides.
2006-07-19 14:59:27 · answer #2 · answered by Oh Boy! 5 · 0⤊ 0⤋
The main driver of exchange rates are the "real" interest rates in the two countries being compared. Real interest rates are nominal or stated rates adjusted for inflation.
2006-07-19 16:38:40 · answer #3 · answered by The Time 2 · 0⤊ 0⤋
current market conditions and national bugdet.
2006-07-19 15:00:28 · answer #4 · answered by cerubus_666 2 · 0⤊ 0⤋