how come currency changes in value?


how come currency changes in value?

In: Economics

Are you gunna want 100 cows or 100 dollars?

You have the only 10 apples in the town, you’re the richest apple owning person in the town.

A man opens a orchard and now has produced hundreds of apples. Your apples are now worth less.

Orchard gets a bad stroke of luck and all the crop burns, your 10 apples have now just gone up in value.

Today 10 Canadians want to buy an American cellphone. 10 Americans want to buy Canadian maple syrup.

The next month only 5 Canadians want to buy a cellphone. Same 10 Americans want to buy maple syrup.

The price of the US dollar now drops because less people want it while the same number of people want the Canadian dollar. When less people want something, you have to lower the price.

Currency is a resource just as much as anything else. supply/demand also apply to it. The more money is created, the less valuable it is. The more stuff to buy there is, the more money is valuable.

Basically it’s supply and demand, if there’s demand then there’s supply but when there’s too much supply and not enough demand things lose value. Now normally people would apply this rule to things like resources and objects but money is also subject to it and so when a country starts printing money the value goes down because there’s more in circulation than normal. This is why during the depression it costs hundreds of dollars to get a simple loaf of bread or some dried meat.

central banks can manage the supply of a currency by “printing” money or take money from the market.

demand for a currency occured when products and services of a specific currency region rises and falls.

there are also some intrensic values to currencies. For example the swiss franc vs the turkish lira. the swiss franc is seen as a stable currency because of the stable government it represents. VS the turkish lira which represents a governemnt where basical principals for trust are in a downfall. This factors ultimately allso influence supply and demand but are also factors influencing currency rates.