The dollar is valued against other national currencies at a continually changing rate, and multiple factors influence the worth of these monies, which causes the dollar's value to rise or fall. The dollar's worth fluctuates in time and changes on a daily, weekly and yearly basis in comparison with other currencies. This change, called the exchange rate, is one of the most watched and analyzed aspects of international markets and economies, notes Investopedia.com.Continue Reading
Exchange rates greatly influence how much business a country does with other countries, notes Investopedia.com. Production rates, imports and exports can all affect the exchange rate of the dollar and influence its value.
Finding the dollar's value requires its comparison to at least one other currency. Differences in interest rates and inflation are two factors that determine a currency's value. Some countries have low inflation rates, which increases the worth of their currency. Others have higher inflation rates and less-valuable currency. This usually coincides with high interest rates, which attracts investors.
Current-account deficits and public debt also influence the dollar's value. Current-accounts show trade balances between countries. A deficit indicates that a country is spending more on trade than it is earning, which lowers its currency's value. A high public debt increases inflation and lowers the dollar's value.
Having favorable terms of trade or international demand for the country's products also raises the dollar's value. Internally, political stability makes countries more desirable for investors, which raises their currencies' value.Learn more about Currency & Conversions