Question: How Do Exchange Rates Work?
Answer: Exchange rates change every day. This is because currencies are traded on an open market, and the demand for them varies based on what is happening in that country. The interest rate paid by a country’s central bank is a big factor, since a higher interest rate makes that currency more valuable. Inflation is also taken into account, since high inflation in a country makes that currency worth less the longer it is held. Finally, a country’s financial stability will also impact a currency over time, since investors want to be sure they will get paid back.
