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
Non-Pegged currency is just a commodity like eggs, or gold, or a goat. Their value is derived from how much people are willing to buy and sell them for.
As such the free market will settle on a price that is about what buyers and sellers think the currency is worth. Typically this is a rough indicator of the strength and stability of the economy that currency belongs to and how much people think that currency will be worth later. Countries with steong economies and an active trading scene will attract investors and merchants and businesses and they want to buy currency. Weaker economies don’t offer the same business oppertunities so fewer people are buying that currency.
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