who determines foreign exchange rates and how are they decided?

Answer 1

If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world. A movable or adjustable peg system is a system of fixed exchange rates, but with a provision for the devaluation of a currency. For example, between 1994 and 2005, the Chinese yuan renminbi (CNY, ¥) was pegged to the United States dollar at ¥8.2768 to $1. The Chinese were not the only country to do this; from the end of World War II until 1970, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.

Answer 2

Foreign exchange rates are determined very much like stock prices -- by supply and demand. When foreign exchange dealers see a lot of demand for a particular currency, they begin to raise its price. If there are a lot of selling going on, dealers lower the price.

Answer 3

2 simple ways.
1) The country: they says is this the exchange rate and do anything to let stay the exchange rate there.
2)The market: Let the demand/supply market of the currencies work, the equilibrium would be the exchange rate.

Answer 4

In free floating exchanges like USD and Yen the market decides. In fixed ones like USD and Yuan, the government decides.