by 3 hours ago
ANSWERS: 2
-
The supply-and-demand balance of the currency markets determines this, influenced to some degree by central bank policies -- basically, the markets have the last word, but the central banks can manipulate it to some degree with various strategies. For example, if a Latin American airline wants to buy an airplane from Boeing, they need dollars to do it. They presumably have their own local currency, but Boeing isn't interested in that... so the airline must BUY dollars with their local currency, in effect. That is demand in the supply/demand balance. People who have dollars to sell (banks, etc) will specify how much they're willing to trade dollars for pesos (or whatever the other currency is). The sum total of these transactions sets the currency exchange rate. Central banks can manipulate the market by dumping or buying their own currency, or their supplies of currencies for other countries. They can also manipulate their own short-term interest rates which affects currency exchange rates indirectly, etc.
-
Along with Stableboys great answer, a few other things effect,the exchange rates. Such as unemployment,interest rates import,exports, politics,natural disasters and war.
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC