Why do different currencies have different values, like why is the AUD different to the USD?

Question

Why do different currencies have different values, like why is the AUD different to the USD?

In: Economics

Answer 1

The value of currencies is “imaginary”. Its value is only defined by how much product it can buy. Imagine two products in two countries. Milk and eggs in America and Australia. In America, milk costs $1.45, and in Australia it costs $1.00. Now, eggs cost $2.00 in Australia and $1.70 in America. Which currency is worth more? The American currency can buy more eggs, but less milk. On average (in this hypothetical) everything is slightly pricier in the American currency, and so it is worth less.