Exchange rates – how do they work?

Question

So hypothetically, if an exchange rate is 1:1, then $1 = €1, right? But if the value of the Euro increases, then it would (hypothetically) be 1:2, so $1 = €2, give or take.

So if that’s the case, then would a currency value *lowering* mean it would be converted for more money? IE: if the dollar drops suddenly, potentially with inflation, and is worth a tenth of the euro, then does $1 = €10?

In: 2

Answer 1

>So if that’s the case, then would a currency value lowering mean it would be converted for more money? IE: if the dollar drops suddenly, potentially with inflation, and is worth a tenth of the euro, then does $1 = €10?

It’s the opposite. In this scenario 1 Euro would be worth $10 USD. if the value of the currency goes down it can be converted into less of another currency.