Exchange rates are reference points, not offers. This guide explains the forces behind the numbers you see.
The Federal Reserve's Global Benchmark Role
As the custodian of the world's primary reserve currency, Federal Reserve monetary policy dictates global liquidity conditions.
Higher Fed fund rates attract global capital into yield-bearing US Treasuries, weakening foreign currencies against the US Dollar.
The Forex Carry Trade
Investors engage in currency 'carry trades' by borrowing in low-interest-rate currencies (like Japanese Yen) and investing in higher-yielding currencies.
When central bank interest rate gaps narrow or widen, massive carry-trade unwinds can trigger sharp exchange rate fluctuations overnight.