I have never really understood how $1 is equal to x amount in another currency. Ik how metric and imperial systems can be converted to each other as length, weight, etc. can be measured. So how is money measured? And why does the currency rate keep fluctuating everyday?
In: Economics
Think of it like the stock market. The stock market is a place where you can buy a small piece of a company. The price you pay for that share of a company is based not only on the value of the company, but also on how you think the company is going to do in the future. If you were offered a share in company A, which you know will be successful, and company B, which you know will fail, you will feel that owning a part of company A is more valuable than company B.
Currency markets are the same thing, but instead of companies, you are betting on the economy of different countries. Countries with a prospering economy become more valuable, while countries with an economy in recession are less valuable.
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