Exchange Rate Determination

Exchange rate determination refers to how the value of one country's currency is set against another's. It is influenced by factors like supply and demand, interest rates, inflation, and economic stability. If more people want a currency (due to strong economic performance, for example), its value goes up. Conversely, if its economy is struggling, demand may drop, lowering its value. Additionally, government policies and geopolitical events can also affect exchange rates. Overall, it's a dynamic process, reflecting a country’s economic health and global market perceptions.