The economics of currency exchange rate has also been rather elusive to me and I have never been able to fully understand how it works. Why do exchange rates fluctuate and what does it mean when one currency is weaker/stronger than another and how does that affect the currency that I am using? People often talk about losing money or getting more money when they exchange currency but what does that mean exactly? For example, looking current at the USD/GBP exchange rate. *1 GBP = 1.126 USD.* If I exchange £ to dollars, am I getting more money or losing money? Which one is stronger? Wouldn’t *1.126 USD not simply be of equivalent value to £*
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> For example, looking current at the USD/GBP exchange rate. 1 GBP = 1.126 USD.
Assuming equal inflation, that example says that GBP is worth more than USD, as 1 “dollar” of GBP is worth more than 1 dollar of USD.
As for why currency rates differ, that’s another topic, dealing with confidence in that country’s economic standing and whatnot.
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