Why does the exchange rate for all money change on a daily basis?

Good question.

Let%26#039;s first look at a world where exchange rates do not exist. Where would we have problems with various currencies of fixed relative values?

Well, first off, not all countries have the same inflation rates. Different countries, depending on their economic states and fiscal and monetary policies, have different growth rates of their money supply, and these growth rates are based on national (not international) conditions.

Now lets assume a country undergoes high inflation. If it had a locked exchange rate, let%26#039;s say 1 unit of their currency = $1, and now they have a ton more currency due to inflation, all of the sudden everyone will be converting their units into dollars! Heck, 20 units of their currency might buy 1 candybar now, but they could get $20 in exchange and then buy 20 candybars! You can see how this is a problem.

That%26#039;s why there are exchange rates. In the above scenario, that inflation would make demand for that unit of currency go way down, and so exchange rates need to adjust accordingly, to assure that the buying power of each currency is appropriately set based on the country%26#039;s economy.

Hope that helps a bit.

Why does the exchange rate for all money change on a daily basis?

because of the different stock markets around the world. the markets control what the rate is going to be - most use a gold standard for this as gold is the univerisal money.

Why does the exchange rate for all money change on a daily basis?

The exchange rates change every day because new information (economic, business, war, natural events, etc) is released that the markets try to factor into the exchange rates.