Currency is the medium of exchange for goods and services in a country. It replaced bartering, and it’s the heart of our modern economy. From traditional paper bills and coins to contactless tap-to-pay technology and cryptocurrencies, currencies are constantly evolving to align with how we live and trade, always striving for simplicity and accessibility. It’s more important than ever to understand Currency. It affects everything from your weekly grocery shopping to your international investments. It’s vital to know how currencies compare and exchange rates work.

The term currency comes from the Latin word currens, meaning running or flowing, and refers to money in a circulating medium. Its origins date back centuries, when metal coins and grains of wheat were used as money, until the introduction of paper money in the 17th century. Currently, most countries have their own national currency, though some peg theirs to the US Dollar or Euro.

Generally, a currency is issued and backed by a government and accepted throughout a nation for making payments in everyday transactions. Moreover, it acts as a store of value and can be traded between nations in foreign exchange markets. The Pound Sterling (GBP), the Euro (EUR), the Japanese Yen (JPY) and the US Dollar are examples of such currencies.

A currency’s value is determined by its supply and demand in the marketplace. Monetary authorities, like De Nederlandsche Bank in the Netherlands, play a significant role in controlling the supply and setting interest rates. Lastly, investors also play an essential role, as they exchange one currency for another, driving the currency’s value up or down. Exchange rates, the ratio between a domestic currency and a foreign currency, are calculated in different ways, including bilateral or trade-weighted indexes.