how does price of dollar changes?

Question

it's an economic question and i think it is something to do with oil prices or bonds

Answer 1

It also has to do with politics. Even if a country is sound economically if the party in power is not pleasing the rest of the world their currency drops in value.

Answer 2

The price of the dollar only fluctuates because there is an international market for foreign currency, otherwise known as Forex. Basically the price of the dollar goes up relative to other currencies when 1) the supply of dollars in the FOREX MARKET decreases or 2) the demand of dollars increases.

Lower Supply of Dollars
A lower supply of dollar can occur when nobody wants to exchange dollars for foreign currency. Because America is one of the largest international consumers of EVERYTHING it is almost guaranteed that you can find any amount of dollars in the FOREX market at any time. American Tourists have to spend money in France, computer makers buy ram from Korea, You buy your next car from Germany, and your archrival buys a Ferrari from italy. These are all activities that cause the dollars supply in the forex market to increase.

This of course is very simplified. Most of the movement in the dollar is caused by the flow of investment money. To simplify things let us assume there is only one kind of investment: savings accounts. Let's say that England offers a rate of 6% whereas America offers a rate of 5%. Where would you invest? England of course (assume no inflation)! Now there's more supply of dollars and less supply of British Pounds (because we're investing those pounds in the savings account)

Demand of dollar increase
Just as we demand foreign goods, foreigners can also demand American goods. This increases the amount of foreign currency in the market and decreases the supply of dollars because the dollar is being used right away to buy a product.

Again investment is what moves the market. Over 50% of the worlds FOrex transactions goes through Wall Street (NYC). With over 20% going through London.

Hope this gives you a basic outline of how currency prices are determined. Cheers.

Answer 3

imbalanced trade makes it fluctuate, printing more makes it fluctuate, more debt makes it fluctuate, the state of our economy will make it fluctuate and the comparison of the dollar to all other currencies and their debt/state of economy/trade imbalances etc.

Answer 4

the american dollar? it goes down down down, where there isnt any snow.