A currency's exchange-rate is determined by the interaction between the supply and demand for currencies in the foreign exchange market.

Question

Quizplus · Accepted Answer

This is because the exchange rate is basically the price of a currency in terms of another currency, and as with any price, it is determined by the forces of supply and demand. When there is a high demand for a currency, its value tends to increase, while when there is excess supply, its value tends to decrease.

A Currency's Exchange-Rate Is Determined by the Interaction Between the Supply