The state of a nation's economy directly affects the value of the native currency on the international market. There is no government agency or financial institution that controls the exchange rate. The currency exchange rate is subject to change according to the circumstances of the worldwide market. These circumstances, which include the supply and demand of the currency and other economic variables such as inflation, may cause exchange rates to fluctuate. The currency's value increases whenever there is a rise in supply and demand. Alternatively, it also decreases whenever there is a decrease in supply and demand.

A floating exchange rate is a rate exchange system in which the value of a nation's currency is set by the foreign exchange market and varies according to other currencies' relative supply and demand. A floating exchange rate does not have any restrictions placed upon it by either constraint on commerce or regulations implemented by the government. There are several benefits attached to floating exchange currencies, including unlimited restrictions when it comes to trading, enhanced market efficiency, and so on.

The term "fixed exchange rate" refers to an exchange rate system in which the value of one country's currency is pegged to the value of another. The term "flexible exchange rate" refers to an exchange rate system in which the value of one country's currency depends on the supply and demand of money in the market.

The exchange rate is highly volatile because of the continual shifts across the global market. The variables influencing the economy, such as interest rates, demand, and supply, are continuously and rapidly shifting. The value of a country's currency also fluctuates in response to changes in the state of that nation's economy.