Title: How Do Currency Exchange Rates Work?
Headings: How Do Currency Exchange Rates Work?
How Do Currency Exchange Rates Work?
There are 2 types and 3 factors that affect them
Key Takeaways
2 Kinds of Exchange Rates
Flexible
Fixed
Why the Euro Is So Special
Three Factors Affecting Exchange Rates
How Exchange Rates Affect You
Article Sources

Content: Fixed
Other currencies, like the Saudi Arabian riyal, rarely change. That's because those countries use fixed exchange rates that only change when the government says so. These rates are usually pegged to the U.S. dollar. Their central banks have enough money in their foreign currency reserves to control how much their currency is worth. To keep the exchange rate fixed, the central bank holds U.S. dollars. If the value of the local currency falls, the bank sells its dollars for local currency. That reduces the supply in the marketplace, boosting its currency's value. It also increases the supply of dollars, sending its value down. If demand for its currency rises, it does the opposite. The Chinese yuan used to be a fixed currency.