What determines exchange rates?

Question

Quizplus · Accepted Answer

Exchange rates are determined by supply and demand for currencies. This means that the value of a currency will appreciate or depreciate based on the balance between the amount of that currency available (the supply) and the amount that people want to buy (the demand). Factors that affect supply and demand for currencies include inflation rates, economic stability and growth, political stability, and interest rates. Factors that increase demand for a currency will cause its value to rise, while factors that decrease demand will cause its value to fall.

What Determines Exchange Rates