The value of a coinlike the euro, dollar or yen, in reality It is not decided by a central authoritybut it is the result of the trend of the economy. Every day, this value is established in the change market, also known as Foreign Exchange or, more simply, Forexwhere currencies (euro, dollar, yen, etc.) are exchanged. In this market, each coin always has one price compared to another: it’s called exchange rate and indicates how much foreign currency can be obtained in exchange for your own. In other words, the exchange rate is the price of one currency expressed in another. For example, if today 1 euro is worth 1.15 dollars, it means that with a euro you can buy 1.15 dollars. The stability of the value of money over time is controlled by the various central banks, and as regards the euro, this responsibility is of the European Central Bank (ECB). Understanding how the exchange rate works is important to realize the “power” of our money and how changes in their value can also influence the simplest daily choices, such as shop online from another country.
What the value of money depends on and what influences it
The value changes every day, and is influenced by many factors, such as: theinflation (i.e. the increase in prices in a country), the strength of the economy and the investors’ trust. In fact, if investors believe that the economy of a given country is solid and growing, they will tend to buy its currencystrengthening its value; On the contrary, if there is pessimism on his trend, his coin yes will depreciate. The mechanism is similar to the one that regulates all financial markets: if many they want good, its value salt; If instead it is little requestedits value descends. Another important factor that affects the value of one currency compared to another is the monetary policy of the country, together with the situation geopolitics: events like wars, crisis or changes of government They can quickly vary the exchange rate.
Let’s see a practical example: let’s imagine that two Italian friends decide to buy online The same pair of shoes from the United States. The first does it in January 2025 when 1 euro was worth only 1.03 dollars. The second, today, when 1 euro is worth 1.15 dollars. The first friend will pay the shoes more, because with his euros he receives less dollars in exchange to pay the order. The second will spend less, while buying the same identical product, only because the exchange rate has changed. The calculation is dividing the purchase price for the exchange rate, for example if the shoes cost $ 100, the first friend would pay them 100/1.03 = 97.08 euros; The second friend would pay them 100/1.15 = 86.95 euros.
The role of the European Central Bank
There European Central Bank (ECB) Publish every day at 16.00 the exchange rates of the euro compared to 31 other currencies, but these data are only used as a reference for the change market as the ECB does not check directly the value of the euro, but can influence it indirectlyfor example by changing interest rates to keep inflation under control.
Because it is important to know the value of the coins
First of all, it is useful to understand that a coin is not considered “strong”Just because more applies of another, but also because it is stable And reliablethat is, linked to a country with ahealthy economy. In fact, there are currencies that “They are worth less” but they belong to countries economically very strong. An example is the US dollarwhich is generally considered the evaluate stronger In the world, even if in reality there are coins that are worth the more.
The primacy in the ranking of the most precious currencies it is up to Kuwaitian dinar: Today 1 dollar is equivalent to about 0.31 dinars. As we saw in the previous example, the exchange rate has a real impact on the daily life of alleven though we often notice it.
When yes Travel abroadit is important to know how much their money is worth in the country of destination, the same applies when yes buy products from other countries (online or in stores): the price may vary depending on the gearbox. It is essential to both companies that make international trade both for investorswhen they invest in financial instruments called in different currencies from one’s own.
