How does the exchange currency work?

gdec1

Exchange Rate The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one euro in terms of one yen, the lower the relative value of the yen. Investopedia Says: In most financial papers, currencies are expressed in terms of U.S. dollars, while the dollar is commonly compared to the Japanese yen, the British pound and the euro. As of the beginning of 2006, the exchange rate of one U.S. dollar for one euro was about 0.84, which means that one dollar can be exchanged for 0.84 euros. http://www.answers.com/topic/exchange-rate Jul 31 06, 8:49 AM

denmarks

Rates are set by the Foreign Exchange Market in the same way stock rates are set. http://en.wikipedia.org/wiki/Foreign_exchange_market Jul 31 06, 8:55 AM

Baloo55th

In reality, it's the amount of one currency you can get for a certain amount of another. Example: when Parsimonia gained independence, the new government set the Squiggle at the same value as the US Dollar. This worked for the first couple of weeks, until people worked out what sort of government Parsimonia had. Then no-one wanted to own Squiggles, as there was little of value you could buy with them. This meant people with Squiggles wanted to sell them, but no-one wanted to buy. Result: the Squiggle fell in value against the Dollar. However, even fewer people wanted to own the Ruritanian Blech, so the Squiggle rose against the Blech as it was a better (but only slightly better) proposition. This sort of thing can happen artificially, as when certain financiers sell large amounts of a country's currency, and make people think they know something special. They do know something special. They know that when everyone else has panicked and sold their holdings, the financiers who started it will step in and (through agents) buy up all they can at a rock bottom price. Jul 31 06, 1:58 PM