How do international currency exchange rates actually work?

So, practically speaking, if anyone actually knows how this works, hit me with an answer:

http://www.exchangerates.org.uk/RUB-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

If I'm reading these charts right, the Dollar is getting stronger against the Ruble, the Ruble is gaining on the Yuan, and the Yuan is strengthening against the Dollar.

If that’s actually what's happening, I'm stumped—why? How can A be stronger than B, B be stronger than C, and C be stronger than A all at once?

The way currency values work on the forex market is basically just pure supply and demand—rates aren't fixed or anything, so the market itself decides what a currency is worth against another.. It’s kind of like walking into a grocery store and seeing five different types of apples—each one has its own price tag based on what people actually want to buy, so the popular ones end up costing more... it's pretty straightforward, really...

Mark Gray3 said:So, practically speaking, if anyone actually knows how this works, hit me with an answer:

http://www.exchangerates.org.uk/RUB-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

If I'm reading these charts right, the Dollar is getting stronger against the Ruble, the Ruble is gaining on the Yuan, and the Yuan is strengthening against the Dollar.

If that’s actually what's happening, I'm stumped—why? How can A be stronger than B, B be stronger than C, and C be stronger than A all at once?

You're reading it wrong. The Ruble weakened against the Yuan.

Mark Gray3 said:So, practically speaking, if anyone actually knows how this works, hit me with an answer:

http://www.exchangerates.org.uk/RUB-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

http://www.exchangerates.org.uk/USD-...e-history.html

If I'm reading these charts right, the Dollar is getting stronger against the Ruble, the Ruble is gaining on the Yuan, and the Yuan is strengthening against the Dollar.

If that’s actually what's happening, I'm stumped—why? How can A be stronger than B, B be stronger than C, and C be stronger than A all at once?

As Bradley Walker88 pointed out, you're reading them wrong. If you understand basic math, you can view these ratios as fractions: RUB/CNY * USD/RUB = USD/CNY

My bad, I totally misread that Ruble vs. Yuan chart. So we're good there—it actually dropped against all three currencies.
But I’ve still got this hypothetical stuck in my head: is it actually possible for Currency A to strengthen against B, then B gains on C, while C somehow ends up stronger than A? Since currencies aren't hard-linked, theory says it should work. But would that ever actually play out in the real world? And if it does, what's the logic behind it?

If you actually wrap your head around how this works, you’re looking at billionaire territory on Forex 😉

Mark Gray3 said:My bad, I totally misread that Ruble vs. Yuan chart. So we're good there—it actually dropped against all three currencies.
But I’ve still got this hypothetical stuck in my head: is it actually possible for Currency A to strengthen against B, then B gains on C, while C somehow ends up stronger than A? Since currencies aren't hard-linked, theory says it should work. But would that ever actually play out in the real world? And if it does, what's the logic behind it?

Man, you basically saw that play out a few years back when the Swiss Franc, the Norwegian Krone, and the Yen were all climbing at once... Look, demand for a currency depends on a ton of moving parts—mostly just where investors decide to park their cash. In a crisis, they flock to bonds, certain currencies, or precious metals, so those stable currencies from strong economies start climbing. Your question is a bit broad, though, because there are a million interdependencies affecting value. Trying to predict a currency move really comes down to knowing market economic indicators and a little bit of gambling... pure luck, honestly. It’s like asking what happens if every single type of apple in the grocery store suddenly spikes in price... obviously, some massive natural disaster would have to hit to drive that kind of demand. It's the same with FX... except here, central banks step in with their own moves to stabilize exchange rates. Why? To keep the domestic economy steady. The Federal Reserve does this stuff all the time—we definitely wouldn't want our dollar's value to swing wildly overnight, right?😉

Some people are practically counting down the days.

Sure, you might see minor discrepancies popping up between markets—though they usually don't stick around long—but for the most part, the math stays sound. When it doesn't? Well, that’s just a golden opportunity for profit, and someone is always there to swoop in and snap those gaps shut immediately. Most major financial institutions will jump straight into the arbitrage process the second they spot any kind of imbalance.

Andrew Booth29 said:Sure, you might see minor discrepancies popping up between markets—though they usually don't stick around long—but for the most part, the math stays sound. When it doesn't? Well, that’s just a golden opportunity for profit, and someone is always there to swoop in and snap those gaps shut immediately. Most major financial institutions will jump straight into the arbitrage process the second they spot any kind of imbalance.

This

When you say "they rarely last long," we’re talking about a matter of minutes. That’s just enough time for a Forex trader to wait for the next wave of buy/sell orders to roll in, ready to capitalize on the chaos for some serious cash 😍

I.

P.S.

These kinds of disparities usually happen during massive, panic-driven currency crashes. For example, imagine if Muammar Gaddafi claimed oil would be traded in gold and Euros, or the European Union announced that Turkey was joining. People freak out, the markets go absolutely wild, and then things settle down. Maybe the US overthrows Muammar Gaddafi, or a German official claims they were just joking about the Turkish situation, and suddenly everything snaps back to normal. 🙂