How the monewy value is being calculated? what are the factors being considered?

Answer 1

Like all economics, it breaks down to supply and demand. If you print more money then it is worth less. That is because there are a certain number of things to buy, so if their is double the money prices would just double.

What is the demand for your money somewhere else? Use dollars and pounds. If you build products they want, say a car. They work and get paid in pounds. If they want to buy your car, they will have to go out and buy dollars and pay it to you and receive a car. So all the products you produce and they buy build up their demand for your currency. Thus the value of your money is based on the economy and productivity of your country.

A big factor can be investment instruments. They have a lot of pounds saved up. But your country wants to borrow more money and to attract it, offers a better investment interest rates. Same as before, they go out and buy your money to be able to buy your bonds or other investments. But if your interest rates drop enough, they will sell their bonds and exchange the dollars back into pounds, or Yen if interest rates a better elsewhere. That is a main tool governments have into the value of their currency - by balancing interest rates verses how much money they want to borrow.