HomeЖивотныеRelated VideosMore From: SimplyExplain

How Exchange Rates Work

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● We explain topics simply. So Subscribe if you want to learn while being entertained. ✔ Please like the video and comment if you enjoyed - it helps a lot! ▶ If you want a question answered then ask in the comments and we may make a video about it! About the video: You may have traveled a lot and wondered why you get more of one currency when you exchange it for another. If so, you have witnessed exchange rates in action, but do you know how they work? Watch the video to find out what exchange rates are, how to convert between them and the different systems which determine a currencies exchange rate. Historically the gold standard system had been used, which fixed currency to a select value of gold, held in a vault. The three main systems are the floating, managed and fixed exchange rate systems. The floating system has minimal government intervention, using supply and demand to determine the exchange rate. The managed exchange rate is allowed to be within a permitted band and a fixed exchange rate is usually pegged to a currency with the interest of being competitive in the international market. The video explains this in more detail and with helpful picture to guide you through the subject.
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Text Comments (183)
Phil King (6 hours ago)
The key to understanding exchange rates is to understand how the bureaucracy works. Can you explain that please? E.g. a tourist lands in a country and exchanges foreign currency for local tender. The transaction is registered to the reserve bank. But what then? Is the local reserve bank linked to all other reserve banks, and updates on all ledgers take place in real time? For example if the government borrows money increasing the money supply, does that also effect the parity in real time as that money is dispersed and multiplied? I mean how large must the servers be to handle all that data? Is that done by the bank of international settlements? Wouldn’t certain people be in a position to speculate based on that info? Specially in smaller countries with a small banking cartel. So really it’s about who gets what information first essentially? The interbank market also then operates based on market info knowing what prices to set then I take it? But wouldn’t the reserve bank have all that info at their disposal, and if it’s private and global then why wouldn’t the owners speculate or use that information to control geo politics? I suppose they do though. It’s kind of like the diamond monopoly.
itsurguy1 (3 days ago)
totally did not explain well so he missed the target
Douglas McDonald (6 days ago)
This video is precisely what I was hoping to find to set the context and identify issues for my AP econ class. It's a very clear, engaging overview of FX markets.
kamala pius (6 days ago)
Is there any difference if someone goes to bank and change is local currency for whatever purpose and the foreign exchange done on online platforms which is done mainly to profit? Am very confused if there are the same thing
Magical Broom (6 days ago)
There are supply of money and demand of money. What I can understand after studying an economic book myself is that the more you demand, the higher the value, or appreciates, ceteris paribus (others stay constant) Take MYR-RM and USD-$ for example. To purchase a Malaysian made item, an american needs to exchange his $ to RM and that is a demand of RM. When people starting to increase buying items made in Malaysia, higher demand of RM will eventually drive the value of RM up, since it has become ''rarer''. However, when people started to reduce the import of Malaysian item, lesser demand for RM would occur, therefore, depreciation of RM happens, since theres more RM in the market, it becomes ''common''. A fixed exchange rate means that under the manipulation of the government, the currency wouldn't rise or fall in value. For example, when the currency appreciates, government would need to make the money less ''rare'' by injecting more local currency into the market, to maintain the fixed value of the currency. For the depreciation of currency, government uses foreign reserve like other currency and gold to purchase own currency in order to lower the circulating of local currency in the market. For managed currency, government sets 2 points called ceiling and floor to manage the over dropping and over rising of the currency value. The currency is allowed to ''float'' in a certain point, up and down but if reached the ceiling and floor point, government will take action as similar to the fixed exchange rate. (I might be wrong, feel free to correct me). And also fking buy RM our currency is depreciating tremendously. :)
Dark Lightning (9 days ago)
I don't understand he tried to be as simple as possible , I understood it clearly.
ÁLVARO VEGA (9 days ago)
Could a country print its currency secretly, having duplicates notes (same serial number) and then make some citizens go around the globe and exchange the currency for any different country? Expending that amount abroad wouldn't create inflation in the original country, and you would have much more wealth( from the asset bought abroad) and everything would turn out of printing out simple paper. Would that scam work?
Mickey Velickovic (9 days ago)
Makes sense , simple as it can get . At least to me , though I am studying finance 😂 Did this in macroeconomics and now Foreign economics/International finance 😁
moist faucet (10 days ago)
There is a reason why Finance is very confusing. first, it is not science. second, by design.
Ja-Kol Nikelai (10 days ago)
... yeah, I have no idea what happened...
Hashir Khan (14 days ago)
This money exchange issue is not something simple to be explained simply but if you want to know it simply remember whenever a currency is used more in foreign markets its value increases.
Why Though (14 days ago)
Look... Google told me If I had 3,000 dollars then I'll have a lot of pesos... A lot.
Z1yaad (14 days ago)
so just change currencies quickly to make money
shobuj chowdhury (15 days ago)
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Carthy (17 days ago)
Nothing about this is simple
Raj Srivastav (18 days ago)
Rothschilds control it.
eLem3nT (20 days ago)
So can I get a handjob for $1 USD???
Sure, go to Detroit bus station, ask for "Six-Finger Larry".
Suresh Ruparel (20 days ago)
Bull shit explanation ask how come 21 trillion defecit currency is so strong are you willing to talk real sense of logic well let me remind most so call big countries sitting with GDP ratio is big defecit now explain how do auditing done of these bankers moves ROTH CHILD CARTEL'S CONTROL ALL THESE BANKING SYSTEM DON'T TRY BOOK BASED NONSENSE EXPLANATION WE UNDERSTAND SHIT OF YPUR MANUPLITATED FIGURE'S 🐒😇😎??
Pita38 (21 days ago)
Swiss Franc no more managed currency
Zara (24 days ago)
Wow, a lot of information. My mind nearly broke
MPK MPK (24 days ago)
This is not a simple explain... 🖕
wala Ogele (12 days ago)
It is
Passion Addict (30 days ago)
exchanging at a specific moment = free money?
Neneth An (1 month ago)
Believe me, not all of the people in stock market are business management grads.
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srinivasan vr (1 month ago)
Thanks a lot it cleared all of my doubts in way on analyzing how exchange rate is fixed .....
Juan Carlos Abril (1 month ago)
So how do you explain this to Middle school kids? You know they'd rather watch NBA or NFL.
Wtf is middle school?
ibrahim bisen (1 month ago)
What are Intentional Devaluations?\
svenm sandity (1 month ago)
yawn for yuan lol u wonton uwon ton
David Uribe (1 month ago)
I was hoping the video would be about buy rates, sell rates, mean rates, spot rates, etc to help explain the concept to others...
albert ansel (1 month ago)
HE HAS A MISTAKE ON MINUTE 2:12 Yuan / $ on the left should be switched with $ / Yuan on the right, then it makes sense, any questions email me at [email protected] cheers
Sthitapragnya Deshpande (2 months ago)
Thanks a lot. This was among the easiest and best explanations that I have heard, about a topic that often foxed me.
SumAnt (2 months ago)
People study Commerce/Statistics to understand this for years. And guys in comments expect to understand within 5 minutes doesn't makes sense.
chris savala (17 days ago)
Yea, if you can explain it value to a Neanderthal then it has no value .
Simone Corvince (18 days ago)
And so many college graduate became jobless after five years studying
Suresh Ruparel (20 days ago)
Bull shit can be understood by simply logic of understanding get honest anylysis be done out go ahead explain how high defecit GDP ratio countries got currency's value strong on what basis 😇🐒😎??
scampiethetank (2 months ago)
How to break your brain
ricky lyngkhoi (2 months ago)
Still don't get it
onlineinfo365 com (2 months ago)
You can find a simple currency converter at https://currency.onlineinfo365.com/
akshay killiket (2 months ago)
Set only one currency for whole world
BarryBear (2 months ago)
THE YON.
rani chugh (2 months ago)
So why is gold so important....cant we decide to value the exchange rate according to the goods and services produced in a specific country
蒋炜 (2 months ago)
every county print its own paper money. no mate big or very small county. because its important way for ruling class to collect wealth from people
rochish M (2 months ago)
Worst ever explanation
Sachin More (2 months ago)
hey i am doing a maths presenation so can someone explain me this video in detail ? if u can please email me.
Botchii (2 months ago)
Roses are red Babies are born The actress who played Po in teletubbies Ended up doing lesbian porn
Gogou Luiz (3 months ago)
What the hell? Make it simple
safwan mp (3 months ago)
why china exchange rate is made decreased
theadrix92 (3 months ago)
I wanted to understand how exchange rates work but i end up being even more confused now.....
I don't think you explain it simple enough. I don't know anything about business and I can't understand it after watching your video. There's some channels that make me understand what GDP per capita is even though I'm not from a business background
top5djs (3 months ago)
How do you actually win in this industry I would like to start off buying some Brazilian reais $500 usd worth, now how would I be able to see a profit?
Michael Miazga (3 months ago)
if you guys cant get simple things. and understand i suggest you to throw away your mobile phone cuz you are getting Facebook Dumb Brain Washed.. and Life washed so you washed your lifes away. you brains is full of shit . Please go to nature and empty your mind.
Janjan Abc (3 months ago)
to much talk but the real answer is not really explained at all
RikWillsBitch (3 months ago)
That just left me more confused. This should be called "QuicklyExplain" not "SimplyExplain"
Dana Manolescu (4 months ago)
Why the value of US dollar is below Euro's value? Is it more profitable from the exports point of view? It means the goods are produced to a lower price (dollar) and sold to a higher price (Euro). A lower value of a certain currency could mean a higher exports value? Than, why Euro and GBP are kept to a higher than dollar?
Vishal Farma (3 months ago)
Cause the pound and the euro is in higher demand that the U.s dolar, because of the free trade agreement in the Eu, alot of trades occur and demand for each currency is alot higher than others. So it's more 'expensive" than the dollar
Dana Manolescu (4 months ago)
Which are the determining factors of the Greek's crisis?
TheRealNoodles (3 months ago)
Abandoning currency and using Euro is the cause of the crisis
Armenias Thunk (4 months ago)
Nope, you can't do in 5 minutes what at best takes 10, probably 20 minutes, and that's supposing the viewer has at least a foundational understanding of macroeconomics. Of course, you could have gone with the whole Americans buying French Wine thing. That is, say there is an increased demand for French Wine from people holding US dollars, but not from people holding the Franc. This demand would cause some price pressure on the overall wine market, but in this instance more of the price-pressure is from the US dollar. Ordinarily, one might just raise the price overall, but because the main sector of the French Wine Market is from France (I assume), raising the price on everyone would cause the Franc holders(yeah, I know Euros, it's an example) to pick up more of the demand-price increase than is a true reflection of the market. So if there is a necessity to hold the current price in Francs, then it would be better to devalue the US dollar at the Foreign Exchange Bank. Of course, the actual value of the exchange rate is determined not only by the multitude of trade relationships taking place, but it is also influenced by speculators based on their own belief in future values derived from various individual pricing models. For the record, I've left out how the value of a currency is initially determined, and probably a lot of other things, but my attempt was only to show the very narrow window of the basic idea why exchange rates vary without getting too complicated. I hope that helped. Peace.
Leonidas Sabr (1 month ago)
The inital value of a currency is arbitrary.
TheRealNoodles (3 months ago)
You do know that if the exchange rate floats then trade flows has little impact on exchange rates. Capital flows have a stronger effect on exchange rates. So what drives capital flows? Speculators.
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ariel casper (4 months ago)
Simply hard to understand for me
Anna Kashpruk (4 months ago)
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Ritesh khatiwada (4 months ago)
How china is making it's exchange rate low?
Maderra -4 (4 months ago)
This is not simple at all
Pattarapol Horsuwan (4 months ago)
This deserve more views
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Ahmet Eren Çakır (5 months ago)
Lets remove the us dollar from world ..its bloody money of evil usa ...humanity should never use dollar for trading purposes to avoid evil trump and his country ....
Nadia Moise (5 months ago)
Very helpful but I fell asleep
Oana Grigorie (5 months ago)
So does this mean the pay grade or the stability of salaries in one country will affect the currency in other countries? For example, if the US government creates a number of new jobs, how will that affect the currency in Turkey?
Angie Torres (5 months ago)
Nope, still very confusion
Nishant Bhardwaj (5 months ago)
Sir Britain pounds se alag karne ka MATLAB batayea
Steven Contreras (5 months ago)
I still don't get what buy vs sell means in exchange rates
Sthitapragnya Deshpande (2 months ago)
Buy - the rate at which the currency exchange outlet / bank buys that currency from you Sell - the rate at which the currency exchange outlet / bank sells that currency to you
Jibon Ali (5 months ago)
For holding and trading foreign currencies basically, Forex trading accounts used. With a broker to open a trading account the process is and then invest some money and after that as a pair start buying and selling currencies. With Forex4you I had open my trading account. Opening a trading account with a good trading broker is very important to make the good amount of profit. Through this exchange business, the process is to make the profit.
psyOmicron (5 months ago)
My question is why are some countries' currency numerical value inflated greatly though? Why 1 USD = 80 JPY instead of 1 = 2?
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Jordan Anderson (7 months ago)
Should i buy Canadian dollars rn?
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Komal Arora (7 months ago)
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Sunah Jeong (8 months ago)
its sort of confusing, how does a pegged exchange work, its used with a different currency, but that currency is floating isn't it?
TheRealNoodles (3 months ago)
When they fix, the central bank just keeps it fixed against another currency at the desired amount by buying or selling its own currency using foreign currency. Doesn't matter if the othet currency is fixed or floating. If the government says your currency is fixed, they will do whatever it takes to fix it. If it depreciates away from fixed price, they will buy their own currency using foreign currency. If it appreciates from fixed price, the government will sell their own currency and buy foreign currency.
Puzzle Belize (9 months ago)
Can one given country exercise all three exchange rate? Fixed, floating and managed?
TheRealNoodles (3 months ago)
Well.. some countries say they will float their currency but 'fix' it in secret. Or manage it. That's what china does.
Mahi Hussain (10 months ago)
At 2:10, did the US sell their exports to China? Is this why the US dollars fell in value to China’s Yuan which led to a rise in demand for Yuan? Or is it the other way round? Also, when the Dollar to Yuan fell in value does this naturally mean that the Yuan to Dollar rose in value? Thank you
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akash goyal (10 months ago)
nice and crisp explanation
Morning star (11 months ago)
how i know next day dollar exchange rate????
Olivia Mortlock (7 months ago)
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Pradeep Kumar (11 months ago)
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2 Land (11 months ago)
Watched this whole video! Thanks
Kevin Thomas (1 year ago)
Toooooooo Complex
LtVax27 (1 year ago)
Been trying to wrap my head around it, been looking at different values and how some countries are basically worthless (1.00 USD = 35256.79 IRR/22717.96 VND/20746.09 STD) How are these numbers even possible? Heard someone talking about a country that is worthless but is the highest exporter of oil in that region and it got me wondering.
Chijioke Madubuko (1 month ago)
Different countries referenced their currencies to the US dollar at different values. The starting point doesn't matter. What matters is how much value has been gained or lost since then.
Neil B (11 months ago)
LtVax27 that's alot
LtVax27 (11 months ago)
That's what was on a currency website
Neil B (11 months ago)
LtVax27 are those numbers you listed accurate?
TheSlyProductions (1 year ago)
The graphs with the big X's weren't simple and they weren't explained.
David Mulnix (9 months ago)
Those were Supply and Demand graphs... Look around for some basic econ videos, or even just "Supply and demand" videos. I think this video was well done for the sub-5 minutes that they used. To explain Supply and Demand as well in this video would, I think, make it a bit too long, and would end up being too much "new" information for most people. Basic Supply and Demand isn't difficult to understand, I would definitely recommend watching videos on that. There are a lot out there.
Anu Gautam (1 year ago)
Atleast answer d questions
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Betsy Kalaora (1 year ago)
what is the importance of exchange rates? Can I have simple explanation?
TheRealNoodles (3 months ago)
To buy foreign currency.
Michael Steele (1 year ago)
It lets you know what your currency is worth in another country if you travel. That way, no surprises.
Jack The Fox (1 year ago)
what?
shankar kumar sah (1 year ago)
What is fixed exchange rate
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Naseer Khan (1 year ago)
best exchange rates 9000688884 hyderabad
Elizabeth Barrilleaux (1 year ago)
Can you help someone holding Iraqi currency what they should be doing? I have no idea how to figure out what 200000.000 Dinar would be in USD. Think currency for idiots. my knowledge is just below that. Thank you & if possible, bless you!!
John Doe (1 year ago)
Elizabeth Barrilleaux Iraqi dinar isn't worth the paper its printed on. I work for a currency exchange company and deal with this money everyday
alphonso843 (1 year ago)
Elizabeth Barrilleaux . It's simple the Iraqi dinar exchange rate as of today with the $U.S. dollar is 0.00085. So times your 2000000 dinar × it's exchange rate 0.00085. = $170 U.S dollars
tomasto (1 year ago)
i will skip
Kitso Romeo Magwadi (1 year ago)
how do i insure against foreign exchange risk
Eddie L (1 year ago)
Dont have all your money in one currency...hedge exposure - diversifying by buying other currencies
Ebrahim Mamsa (1 year ago)
Thanks for the video. For the beginners it is very important to know how exchange rate works. This video explains it simply and in best way. I want to suggest every beginner trader to watch this video who still confused about how exchange rates work and for them also who want to know about exchange rates. Looking for more this kind of videos. I am also a forex trader and dealing with ECNCAPITAL.
Kèiren (1 year ago)
I have a question regarding the graph at 2.01. The video states that the Chinese Yuan may be in greater demand in comparison to the U.S dollar, due to imports. Are these 'imports' referring to Chinese imports into the US ?

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