What Are Currencies?

Currencies

What Are Currencies?

Currencies are monies in general use as legal tender in payment of obligations. However currencies are different in many respects. For example a dollar bill will generally only be accepted if it can be denominated in US dollars. So what is a currency? In the simplest sense a currency is currency in some specific form when in circulation or use as a medium of trade, particularly circulating foreign coins and banknotes.

All nations throughout the world have a currency system which is a legal tender for trading. This is because each government issues its own coins to be issued as money and the value of this currency changes based on the buying power of the nation’s stock market and the demand of that nation’s citizens for its domestic currency. Currencies are generally measured in terms of the unit of currency against the unit of another country’s currency. A US dollar will value better than a British pound because a British pound is under a unit of British pounds.

The various different currencies that are listed are generally recognized internationally because their values are determined by international banking institutions. However there are some exceptions to this rule. For instance there is no standardization of the unit of currency used to determine a Canadian dollar against a US nickel. As well, it is not a simple task to determine the value of the United States dollar against the Japanese yen as there are numerous factors influencing its value including the value of the US economy and the political system of both countries.