A currency's value can be determined in one of two ways: by a floating rate or by a fixed rate. Floating rates are determined by the open market, which is dictated by supply and demand on international currency exchange markets. The value of a currency will increase if it is in high demand. Lack of demand for a particular currency will cause its price to fall. As a result, a variety of technical and fundamental factors will influence what people perceive to be a fair exchange rate and how they determine their supply and demand. As a result of the collapse of Bretton Woods between 1968 and 1973, the currencies of most of the world's major economies were allowed to float freely. Therefore, most exchange rates are not fixed, but are determined by the volume of trading that takes place on the world's currency markets on a daily basis.

Most countries use floating exchange rates. This means that the value of the currency is determined on the open market, rather than set by the government. Floating rate can change quickly and dramatically depending on economic conditions, while fixed rates are more stable but more difficult to adjust if economic conditions change dramatically. Fixed rates help stabilize economies, but make it harder to deal with international trade problems like competitive devaluing.