How are exchange rates determined and who enforces them? How does a country buy its own currency and what does that mean?

Question

How are exchange rates determined and who enforces them? How does a country buy its own currency and what does that mean?

In: Economics

Answer 1

Demand and supply, as usual.

1) If country A exports a lot to country B and B doesn’t export that much to A, a lot of people, companies,… in country B will buy things in country A’s currency

2) If country A is “stronger”, shows more growth,… than B, investors will be more likely to invest in country A’s currency hoping it’s a good investment.