How is the value of one countrie's currency is compared with the currency of another country.?

Question

for example one Kuwaiti dinaar is equivalent three and odd USD. iS that means that the value of USD is less than Kuwaiti dinaar. Please explain how is it calculated.

Answer 1

A Kuwaiti Dinar is worth more than a US dollar? Damn.

Basically, currency's value is based on its perceived scarcity. Right now, US currency is the world's currency, on which everything else is based (not that we're cocky, or anything).

How much a country borrows, how much it produces, how much it exports all contribute to its price relative to others. There's actually a currency exchange that operates 24/7, in which people constantly trade one currency for another. So, in a sense, market forces like greed and fear come into play.

Simply put, one currency x is worth an amount (y) of currency z that someone else is willing to pay. x = (y)z

If it's still unclear, trust me, you already know more than the average person clutching their paycheck. And economists have struggled for centuries to figure out this whole "money thing."

Hope my little rant helped.

Answer 2

Currency rates are a case of supply and demand.

If the US wants to buy something from the UK then it needs to have Sterling and vice versa. Now if one side where to be importing a far greater amount (trade balance) then there would be an oversupply of that currency and less demand for it, as such it would weaken relative to other currency. Exporters would want more of that currency for the same amount of stuff.

All currencies are interlinked and traded 24/7