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.
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.
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