Currencies like Euros and Dollars are traded on the world market all the time, every day. Most countries allow the value of their currency against others in the world to be based on supply and demand. That is, if a lot of investors in other countries buy dollars, then the value of the dollar goes up against other currencies like the Euro or Yen. If a lot of people sell dollars to invest in others, then the value of the dollar goes down.
So when you travel to Canada and they post an "exchange rate", they are telling you how many Canadian Dollars you can get for an American Dollar. That exchange rate will change each day a little bit because both currencies are "free floating".
There is some controversy right now between us and China, because they keep their currency off the float exchange, or at least limited, so that their Yuan is artificially more valuable than it would be in world markets. Obama may have finally just gotten them to relent on this and trade the Yuan more freely. This could lead to lower prices for goods made in the US and sold in China, which may create jobs here in the US.
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