Currency
Before currency were invented the whole world run through barter system. Barter system means exchange of goods for goods. But it has its own deficiencies. A person with a cow want to buy a bag of rice, but the bag of rice don't want the cow and he's looking for a good sheep. Comes the problem of exchange. Here money comes into the picture.
The owner of the cow sells it and buys the bag of rice. The owner of the rice got the money and he buys the sheep too. problem of exchange had been solved for the time being. But how exchange rate is confirmed in the market. Everyone pegs its currencies to one of the best currencies in the world ie., United States Dollar. Rupee is pegged to United States Dollar. Lets take the trade of United States v/s India.
United States exports more goods to India and purchases few products from India. For ex: United States exports machinery to India. India or Indian Companies paid in United States Dollar. In United States Trade system, its surplus money had been come from India. Whereas India looses money by importing it. Automatically Indian Rupee will fall compared to United States Dollar. Next United States imports foodgrain from India. India receives US Dollar from USA. India got more reserve, so Indian Rupee will appreciate in comparison with US Dollar. At last by tallying, on monthly basis, we see that USA is having more trade surplus with India. So Indian economy looses US Dollar and Indian Rupee will depreciate.
So every government tried to access more US Dollar to their country, so that they remain surplus and their currency will appreciated. It depends upon what they are producing, What price, How they are producing using technology, Its future uses, etc.
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The owner of the cow sells it and buys the bag of rice. The owner of the rice got the money and he buys the sheep too. problem of exchange had been solved for the time being. But how exchange rate is confirmed in the market. Everyone pegs its currencies to one of the best currencies in the world ie., United States Dollar. Rupee is pegged to United States Dollar. Lets take the trade of United States v/s India.
United States exports more goods to India and purchases few products from India. For ex: United States exports machinery to India. India or Indian Companies paid in United States Dollar. In United States Trade system, its surplus money had been come from India. Whereas India looses money by importing it. Automatically Indian Rupee will fall compared to United States Dollar. Next United States imports foodgrain from India. India receives US Dollar from USA. India got more reserve, so Indian Rupee will appreciate in comparison with US Dollar. At last by tallying, on monthly basis, we see that USA is having more trade surplus with India. So Indian economy looses US Dollar and Indian Rupee will depreciate.
So every government tried to access more US Dollar to their country, so that they remain surplus and their currency will appreciated. It depends upon what they are producing, What price, How they are producing using technology, Its future uses, etc.
Yahoo News
