What determines exchange rates?

Question

Quizplus · Accepted Answer

Exchange rates are primarily determined by the forces of supply and demand for currencies in the foreign exchange market. When demand for a currency increases, its value strengthens, and when demand decreases, its value weakens. Factors that influence supply and demand include economic data, political events, and market sentiment. The stock market, import/export market, producers, and consumers can indirectly affect exchange rates through their impact on the overall economy and market conditions, but they are not direct determinants of exchange rates.

What Determines Exchange Rates