Think of currency like any other product (supply/demand). Its value is whatever people are willing to pay for it.

1.How much money worth of goods does a country export in comparison to its imports? Exporting more can make a country’s currency worth more.

2. Do people want to hold on to the currency? Do they think its going to go up, or go down in value? If people want to hold on to your currency, that increased demand makes it worth more.

3. What is the supply of the currency outside of the country? How much of each currency is flowing in and out of the country? If your country buys a lot of foreign goods (by sending its cash overseas), that increased supply of cash makes your currency worth less.

As an example, a good comparison is the US vs Canadian Dollar. Canada exports more goods to the USA than it imports from the USA - mostly because of its vast natural resources - especially oil. The USA purchases oil from Canada.

Because of this, if the price of oil goes up, the USA pays Canada more money - this makes Canada awash in US Dollars (increased supply) - which makes US Dollars worth less to Canadians, and makes the Canadian dollars STRONGER in comparison to the US Dollar.

In effect, if a country EXPORTS MORE goods to a country (without printing more money or importing more), the value of its currency goes UP.

And, if your country IMPORTS more - they are sending their cash to that country to buy those goods (increased supply of cash). This makes the value of your currency go DOWN (in comparison to that country’s money at least).

Also, some countries’ currencies (USA, UK, Japan, Canada, Switzerland, Euro Zone) have a long history of being stable, and those countries’ economies are generally stable as well. So when a person or government wants to hold money, they will usually hold one of those currencies - they call them "reserve currencies". That also increases their demand, and gives them some value.

Finally, sometimes governments intervene in the value of their country’s currency. They will buy/sell their currency to make it worth a certain amount. If a country wants to do this, it will need to have enough foreign currency in its reserves to buy back its own currency. Until recently, China had its currency "fixed" at 8.28 Chinese Yuan to the U.S Dollar. To do this, the Chinese government had to buy and sell enough of their currency to make it worth that amount, and guarantee that people can always exchange 1 US Dollar for ever 8.28 Yuan whenever they want - to prove its value.

For example Italy has a stronger dollar than us right now. Say you went to Italy and you wanted to turn one american dollar into a one Euro. You would have to pay like a $1.33 (I think) to get that one Euro. And then say you’re a Italian coming to America and you want to trade in one Euro for an American dollar you would trade in a Euro and get $1.33 in return. Italy has a stronger dollar. We have a weaker dollar.