Why does the dollar fluctuate?

Answer 1

The dollar's worth is NOT tied to the worth of gold held in our treasuries anymore. What it is tied to is the global economy, what investors are doing in the stock market for example. If lots of countries buy our debt and feel that is a safe purchase (meaning we will pay off the debt at the prescribed time) the dollar's value will be high. It is good to think of the dollar as being like any stock in a company....when investors are confident in a company's management (or the U.S. President if speaking of the dollar) they buy lots of stock and wait for the price to increase with the profits of the company (in the case of the dollar, profits are the monies made by exporting goods). If it goes the opposite, and investors lose faith in the company, the stock price declines as everyone rushes to sell their holdings in a bad company. If investors of the U.S. dollar feel negative about the U.S.' ability to repay its debts and increase export profits they start to sell their holdings and the dollar's value (just like a stock's value) starts to go down.

Answer 2

Basic supply and demand. If there is greater demand for US$ as a result of capital inflows into the country, say because the interest rate on US assets is higher, then the price of $ will rise as seen by an appreciation in the currency.Federal reserve may try to fiddle with the interest rate to alter the competitiveness of US exports (e.g. it may want to devalue the $ to make US exports comparatively cheaper). It is generally assumed tat wit complete arbitrage and rationality currencies will fluctuate according to Uncovered interedt parity (UIP). This argues that the only reason people would hold a currency that offers a lower rate of interest is because they are expecting an appreciation that would compensate. At the moment this isn't happening, there seems to be some irrationality in the currency market for now that is keeping the $ from falling further.

Answer 3

Compared to other currencies, and minerals,
the dollar has hardly fluctuated lately
Unfortunately for my answer I have not studied
what mechanisms the government has applied
to stabilize the value. Some currencies have a
real value, whereas others maintain a "phony"
value, depending on the monetary instruments
being utilized

Answer 4

The value of the dollar is based on the price per one pound of gold. In addition, if we export more than we import, that can also affect the value of the dollar. If it is vice versa, the value declines.