What determines the dollar value of a country's currency?

Answer 1

strength of the economy.

Answer 2

if the country participates in "world currency markets" then what determines the value is the amount currency investors are willing to pay for the currency exchange. i.e. 1 doller = ______ units of the currency u r concerned about.

However, currency markets are not perfect. Some countries refuse to let their currency totally "float" on the market. That is, some countries artifically refuse to sell their currency for more or less than a price they set. This is currently the case for chinese currency vs. the dollar. the chinese are arbitrarily holding down the value of their currency in relation to the dollar. If they let it "float" totally, then current opinion is that the relation between chinese currency and the dollar would change dramatically with the chinese currency worth a lot more. if that happened then it would be problamatic because the dollar would be worth substantially less. in this case the us government would like them to gradually let it float, for a variety of other reasons, such as imbalance of trade, etc. it is a strange and liquid thing, and there are no guarantees on the future of the dollar. some countries are on the gold standard where their currency is backed by gold. the USA dropped the gold standard some years ago. makes u think huh?

Answer 3

It depends on what they base their currency on. Some people have their currency float against the US Dollar, some of them base it on a precious metal, like silver. The US Dollar used to be based on Gold reserves, but it is now sort of a free market currency.

It's very strange how currencies work, but they are traded on exchanges just like stocks. Right now, compared to the Euro, the dollar is weak. That will change over time.

Also, the amount of currency a country prints can also have an impact. Argentina made a HUGE mistake. Their currency was weak on the international market, so the country printed MORE money in order to have the value to pay off debts. However, by printing more money, they weakened the value of their currency further, and the country went into a death spiral of inflation.

Most currencies are de-regulated and change based on market forces, just like stocks, metals, etc.

Answer 4

Currency control is a system whereby a country tries to regulate the value of money (currency) within its borders. From simple to complex policy changes, it can be characterized as a government initiated system to control currency fluctuations through interest rates, bonds, laws, money printing, and many more.

Whenever a country does not have strong enough currency control, hyper-inflation or depression can result.

Answer 5

Currency control is a system whereby a country tries to regulate the value of money (currency) within its borders. From simple to complex policy changes, it can be characterized as a government initiated system to control currency fluctuations through interest rates, bonds, laws, money printing, and many more.

Whenever a country does not have strong enough currency control, hyper-inflation or depression can result.

Answer 6

Simple question, difficult to answer. There are many different theories to explain the foreign exchange rates. The simplest is the Purchasing Power Theory (PPP). PPP is based on the theory of one price: if a car costs 5000£ in the UK and the identical model costs 10000$ in the US the the exchange rate should be £0.5/$1. Otherwise there would be an arbitrage possibility. This absolute version of the PPP is unlikely to hold because of transportation costs, imperfect information and tariffs. The relative version of the PPP argues that the exchange rate will adjust by the amount of the inflation differential between two economies.

Answer 7

the fee of a international locations forex is set by using a number of element even if basically 2 are properly worth stating it. One, basically positioned, is grant and insist. the optimal traded currencies are the greenback, Euro, and Yen. they have a intense replace fee because of the fact they administration their industry zones and all international banking transactions are executed in that forex. the 2nd is an oblique relationship to investments and a 'danger u . s . element.' The extra investments and the the better letter grade (A being the optimal) acquire by using a rustic additionally help confirm the fee of it truly is forex. GDP even if is a element, has little to do with the easily fee of forex replace. The Yen isn't valued low in any respect, in assessment the greenback is decrease priced while in comparison with the yen. the reason that $a million is worth 118.31 is using inflation in Japan.

Answer 8

The world's currencies are sold in a commodity market. The various currencies are a commodity, just like corn or bean or wheat and, being commodities, they are worth whatever someone is willing to pay for them.

For the most part, Countries don't set the value of their currency but let it float on the world market... just like oil.

Answer 9

There is no simple answer. Inflation, interest rates, slope of the yield curve, balance of payments, and terms of trade all play a role. The relative extent of the roles played by a particular variable depends on the country and time period. Inflation and terms of trade are particularly important for emerging-market currencies, interest rates and the slope of the yield curve, for developed-market currencies.

Answer 10

the daily price of gold determines the worth of currency

Answer 11

In Canada's case the strength of the US dollar