I want to know how exactly the amounts for exchange rates are determined and I have been searching in google but I still don’t get it. For example how do they set that US $1 = 57 Philippine peso?
In: Economics
The same way the price of a banana is determined. Supply and demand: if more people want to buy bananas than there are bananas the price increases. If you have a lot of bananas but not many want to buy them you’ll lower your price until someone says “that’s a good deal for a banana!”
In very few cases the central bank will attempt to regulate the price of a currency, mainly when pegging the value to a different currency. However, for the most part it’s mainly just what people are willing to pay for it.
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