Why is the British currency worth more the American dollar?

Answer 1

It isn't "worth" more if you compare PPP.

The exchange rate is higher due to different monetary policies by the respective central banks.

Answer 2

The dollar buys noticeably less in the UK and the European Union than it does in the US. This should indicate that the dollar is undervalued. But the fact that Europe and the US are running trade deficits with the rest of the world would indicate overvaluation for all. I have read what experts say and there seems to be no consensus. I don't think anyone can answer your question. There is a lot of money in the currency markets that would also like to know.

Answer 3

Why not? There's no reason they should be the same value. For some reason people often assume different countries' currencies should be equally valued, and look for a reason they're not, but in fact there is no basis for that belief. They are different currencies that were created centuries apart in different countries on different continents. No reason to expect them to be priced the same, any more than you'd expect a pair of blue jeans to cost the same as a banana.

The British Pound was created in the 1560s and was defined as equal to a certain amount of silver. The US Dollar was created in 1792 and defined as equal to a certain amount of gold. Things have evolved a lot since then,and the currencies are no longer tied to metal. A hundred years ago a Pound was worth about $4, but their values have drifted and generally the Pound has lost value to the dollar, but it tends to go in cycles.

Their relative values are nothing but historical accident, in fact it's only a coincidence that they are even close to one another in value -- consider the Dollar is equal to about 100 Japanese Yen.

** To Meg's point below. The fact that a dollar buys less in Europe than it does in the US does not mean that the dollar is undervalued. It simply means the economies of Europe are less productive than the US economy. It takes a greater value of inputs to produce a given product in Europe, and so it costs more.

Answer 4

It is arbitrary. In the 1920s pound was worth $5.00. During World War II it was $4.00. In 1967 the value was $2.80 and was cut by the British government to $2.40 late in the year. I think it may have been 1985 when it dropped to $1.05 before recovering to about $1.80. The exchange rate is influenced by supply and demand for inports and exports, with market fluctuation, but in some case by the decision of a government to either profit or to encourage the domestic economy.

Answer 5

America's economy is going to crash.
Not if, when.

Answer 6

Less infation(?)