How do u determine the value of money internationally??

Question

i mean, how do u come u with numbers like..

$10american dollar is equal to ~6.5 euro

pls help thankyou

Answer 1

Money is traded by banks and institutions literally every minute of the day.  When you go to an airport to go to another country, there are money changers present.  You can also usually go to your local bank and buy foreign currency.  All of these little transactions, and the big ones too, result in banks offering money to each other.  If lots of dollars are offered compared to euros, compared to recent offerings, then the value of the dollar falls to fit the available euros.  Likewise, if few dollars are offered compared to euros compared to recent offerings the value of the dollar increases.

So the exchange rate for the major currencies are based on how many of which currencies people want, compared to what other people will offer.  For many currencies with fixed exchange rates, those countries' central bank is the only market maker and will buy or sell their own currency at some fixed exchange rate.  It can do this to the extent it has sufficient foreign reserves already.

Answer 2

Value of currency is relative to the ability of a nation to exchange items of production.  Commodities in demand by consumers will vary in value according to availability.

Currency facilitates the exchange.  Nations must monitor the printing of currency to pace the value in the marketplace.  Printing excess currency diminishes the value for exchange.

Euro is a currency invention by several European nations to keep pace with US wealth.  It is relatively new.  It's benefit is being tested in the marketplace.