How are the currency exchange rates set?
Jamesy C asked:
What makes the currency exchange rate go up and down and who sets them? Thanks.
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What makes the currency exchange rate go up and down and who sets them? Thanks.
April 2nd, 2009 at 7:30 pm
Currency speculators.
April 3rd, 2009 at 10:57 am
No-one sets them - the price is decided on supply and demand. Its the same as anything - if everybody is selling eggs and there are too many eggs for sale, the price goes down and vice versa.
Exchange Rate fluctuation is simply the rise and fall in the value of one currency against another. Exchange rates fluctuate every second, and these movements are generally caused by four things. Economic Data, Political Data, Natural Disasters and acts of war.
A good example is last week when the Fed announced $1.2 trillion would be pumped into the economy. Investors think creating new money will devalue the dollar, so as investors moved funds from USD to EUR, the dollar got weaker(less in demand) and the Euro got stronger (more in demand). The net result is Sterling exchange rates for the dollar rose, and for the Euro fell.