What makes the US Dollar to lower it's value amongst other currency. What's the drive?

Question

I kinda understand printing money may do that... Does inflation affect it? What is really an inflation? (or how is it measured)

Answer 1

well...this is sort of complicated. what is happening to the US dollar right now is that we are importing a lot more than we are exporting. therefore, we are demanding other countries' currencies and we give more dollars to convert to the currencies of other countries, because people in other countries want the currency of their country, not dollars. there is an intersecting supply and demand curve for the currencies. the y-axis is price and the x-axis is quantity demand/supplied. So, when the US converts their dollars to another currency, there is a larger supply of the US dollar (the supply curve is upward sloping and the demand curve downward sloping). So, the supply curve shifts to the right, making the equilibrium point of demand and supply lower and to the right, and the price of the equilibrium is lower. for the other country the demand curve increases for their currency because the United States is demanding the other currency. this causes the demand curve to shift to the right and the equilibrium point goes to the right and up. So, the equilibrium price of the country's currency increases. This is what is making the value of the dollar lower compared to other currencies.

Answer 2

first, "printing money" isn't good terminology - the creation of most money is simply via bookkeeping entires.  

e.g. a bank borrows money from the fed, each make a bookkeeping entry and viola! the money supply has increased, and that's your measurement.

That increase is usually inflationary;  thus inflation is not cause, it is effect.

Answer 3

Printing money and all that have nothing to do with changes in the value of the dollar compared to other currencies.

Exchange rates are determined by supply and demand of a currency on the currency market. For example if a European wants to buy an American bottle of Budweiser, he or she will have to basically buy American dollars from the currency market. This increases the demand for American dollars slightly raising its value.

There are other factors that affect currency not mentioned also. They have less of an effect.