For instance the Japanese 100 yen converts to just 1 Australian dollar.
In: Economics
Currencies are created to meet the needs of the country’s people. When the yen and won were created, for example, Japan and Korea were fairly poor countries (relative to Western nations). They needed goods and services in their country to be priced at values that “make sense” to ordinary trade. You don’t want a yen to be equal to a dollar in 1871 because then most people would be earning and buying and selling stuff in fractions of a yen. Unlike say Australia or the US, there is no fractional yen or fractional won whereas you have things like 10 cents or 25 cents.
As it turns out these countries developed economically and this in turn meant that “values” of the goods they produce now match the value of goods in developed countries. While in 1871 a worker in Japan would earn a few tens of yen for a days work, today a worker in Japan would earn a few tens of thousands of yen a day – and that in turn means goods are priced accordingly.
Latest Answers