So in my country they say we soon reach a record low value of 365 HUF/EUR and i was thinking, who has the authority to justify this value and how it is calculated?
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Supply and demand.
Each country controls how much of their currency there is (with the exception of the EU, where a bunch of countries work together. If country X does a lot of export, other countries will need currency X to buy their products.
A reason the Euro is so stable is that many countries use it. So even if Luxembourg has a slight financial crisis, the Netherlands and Germany and France and all the others compensate.
Generally speaking, no one person or organization.
If the country has a mostly floating (ie not controlled) currency, then the exchange rate is determined by the “market” demand and supply of their currency.
If a country exports a lot, it creates demand for their currency (buyers need to pay for goods in local currency). If a country imports a lot, it creates a supply of currency (ie they exchange local currency for foreign currency).
If a country has a stable and strong economy, does lots of trade, has a reasonable legal/government system and provides a safe location to hold currency assets, international financial institutions will also play a role in the value of the currency.
Central banks can play a “buffer” role by providing supply or demand to the market. This can alleviate short term appreciation or depreciation. Generally providing demand requires the central bank to hold foreign reserves and therefore this is expensive. Providing supply can result in inflation since the money likely circulates back into the domestic economy. So this “buffer” is typically limited unless the government imposes capital controls (too complicated for an ELI5)
Supply and demand.
Each country controls how much of their currency there is (with the exception of the EU, where a bunch of countries work together. If country X does a lot of export, other countries will need currency X to buy their products.
A reason the Euro is so stable is that many countries use it. So even if Luxembourg has a slight financial crisis, the Netherlands and Germany and France and all the others compensate.
Supply and demand.
Each country controls how much of their currency there is (with the exception of the EU, where a bunch of countries work together. If country X does a lot of export, other countries will need currency X to buy their products.
A reason the Euro is so stable is that many countries use it. So even if Luxembourg has a slight financial crisis, the Netherlands and Germany and France and all the others compensate.
Generally speaking, no one person or organization.
If the country has a mostly floating (ie not controlled) currency, then the exchange rate is determined by the “market” demand and supply of their currency.
If a country exports a lot, it creates demand for their currency (buyers need to pay for goods in local currency). If a country imports a lot, it creates a supply of currency (ie they exchange local currency for foreign currency).
If a country has a stable and strong economy, does lots of trade, has a reasonable legal/government system and provides a safe location to hold currency assets, international financial institutions will also play a role in the value of the currency.
Central banks can play a “buffer” role by providing supply or demand to the market. This can alleviate short term appreciation or depreciation. Generally providing demand requires the central bank to hold foreign reserves and therefore this is expensive. Providing supply can result in inflation since the money likely circulates back into the domestic economy. So this “buffer” is typically limited unless the government imposes capital controls (too complicated for an ELI5)
Generally speaking, no one person or organization.
If the country has a mostly floating (ie not controlled) currency, then the exchange rate is determined by the “market” demand and supply of their currency.
If a country exports a lot, it creates demand for their currency (buyers need to pay for goods in local currency). If a country imports a lot, it creates a supply of currency (ie they exchange local currency for foreign currency).
If a country has a stable and strong economy, does lots of trade, has a reasonable legal/government system and provides a safe location to hold currency assets, international financial institutions will also play a role in the value of the currency.
Central banks can play a “buffer” role by providing supply or demand to the market. This can alleviate short term appreciation or depreciation. Generally providing demand requires the central bank to hold foreign reserves and therefore this is expensive. Providing supply can result in inflation since the money likely circulates back into the domestic economy. So this “buffer” is typically limited unless the government imposes capital controls (too complicated for an ELI5)
Anything and everything only has value because someone else will give you something for it. That’s it, no other reason.
Currency rates are the result of a lot of people making individual decisions about exchanging one currency for another, all day long. Their sum total efforts are the currency markets, and the “going rate” is what gets published. But each individual transaction in those markets is going to go for a little above or below that rate, as two people both think they’re getting an edge on the overall value of the deal. One of them is wrong every time, but they all think they’re right, so they keep going. If enough people try the same direction, the “going rate” changes.
Anything and everything only has value because someone else will give you something for it. That’s it, no other reason.
Currency rates are the result of a lot of people making individual decisions about exchanging one currency for another, all day long. Their sum total efforts are the currency markets, and the “going rate” is what gets published. But each individual transaction in those markets is going to go for a little above or below that rate, as two people both think they’re getting an edge on the overall value of the deal. One of them is wrong every time, but they all think they’re right, so they keep going. If enough people try the same direction, the “going rate” changes.
Anything and everything only has value because someone else will give you something for it. That’s it, no other reason.
Currency rates are the result of a lot of people making individual decisions about exchanging one currency for another, all day long. Their sum total efforts are the currency markets, and the “going rate” is what gets published. But each individual transaction in those markets is going to go for a little above or below that rate, as two people both think they’re getting an edge on the overall value of the deal. One of them is wrong every time, but they all think they’re right, so they keep going. If enough people try the same direction, the “going rate” changes.
It’s the supply and demand equilibrium of the market, rather than some top-down authority. In other words, the most popular trading between the two currencies currently is on the basis that a single EUR is worth 365 HUF. And so The 365 HUF/EUR is literally the calculation.
The valuation comes from various economic factors, including the financial and economic stability and potential of each country (or union).
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