Simply put, the value of anything is determined by its need for it. This includes goods, services, or even how you pay for those things, aka “Money”. The value of a currency has a few major ways it is determined.

One of the major ways currency value is determined is by the exchange rate of it into other currencies, ex. USD -> EUR. If one USD is worth .9 EUR and the value of EUR rises, so does the USD.

Another way the value of a currency is determined is by foreign exchange reserves. For example, let’s say the UK government would dump all of their EUR they are holding onto into their society, that would drastically lower their EUR price and in turn lower every other currency that exchanges with it.

Advertisements