How exchange rates of various currencies are determined?

We in our activities like travelling and your business import or export see that there are different rates for the currencies we trade exchanging our national currency. For exampl say we stay in U.S. and we are moving to Europe for a trip so we exchange the USD to euro and we see taht there an exchange rate to do so. Often we find variation in it day by day. So how does this exchange works?HoW IS THIS EXCHANGE RATE OF CURRENCIES DETERMINED?

Earlier it was determined in terms of gold the country had in its reserve with USD being a standard . This was the case beore world war. But later after the world war the rates were changed and then the rise of forex market arrived.

The forex market is where speculators and bankers move the exchange rate of currencies based on fundamental analysis and technical analysis . But also the countries have fixed rates for a duration for some important issues.

Whatever we see while travelling are rates that change everyday based on the moves in Forex market. These are changing everyday. Forex market is biggest in the world with turnover in trillions and each day it keeps on increasing.

As you might have seen that USD is considered reserve currency in the world we see that most of the times like this we are in now where stock markets fallen to its lows the USD has strenthened undoubtly because of people putting in lot of cash in USD and safeguarding there money . Thats why the usd rate in exchange for the local currencies in other countries rose except the japanese yen which strenthened more than USD.

So its basically forex market that determines the exchange rate of the currencies.