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Exchange rates are determined by markets based on supply and demand, with demand being based on things like investment opportunity, as well as structural demand
by HarHarVeryFunny 2y ago
Exchange rates are determined by markets based on supply and demand, with demand being based on things like investment opportunity, as well as structural demand such as for petro-dollar oil payments.
Currency markets are mostly too big for governments to be able to manipulate (e.g. George Soros & GBP).
- whatshisface 2y agoThe market can adjust the exchange rate between the US and the EU, but not between the Portugal and Spain. This is in a sense the ultimate in government currency control, and if 1:1 is not the exact ratio that the market would have set, one of the two countries will be emptied out.
- HarHarVeryFunny 2y agoIf the Portuguese economy was booming relative to Spain, then "the market" (investors) can still take advantage of that by investing in other Portuguese assets such stocks and real estate. If a government wants to address a trade imbalance then import tariffs is one way to do it - or policy changes affecting cost of goods produced for export.