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Why are currency values not the same across the world?

I have done my research on the Internet before coming here to place this question on Yahoo!. I have so far not had much progress in understanding why currency values vary. So, if you can, help me understand but keep your answers in the simplest of terms.

I am from India and our currency, the Indian Rupee, stood at INR 45.00 vs USD 1.00 the last time I checked. Is this because India has borrowed a lot in US dollars? Or is it because Indian people are not rich enough?

We currently pay about INR 57.00 per a liter of gas (petrol). If our currency value was the same as the dollar value, we would pay not more than INR 2 for the same. Our exports are cheap while our imports are far more expensive.

I don’t understand why Indian Rupee has such a low value in the international market.

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This entry was posted on Wednesday, June 2nd, 2010 at 11:10 am and is filed under Currency Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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One Response to “Why are currency values not the same across the world?”

  1. I_think$ Says:
    June 2nd, 2010 at 11:10 am

    The currency within a country is a uniform translator (medium) of the value of bartered goods. So the value of the currency is a reflection of the wealth in a country, and how people value their goods and services. Because economies have grown (and inflated) at different paces over different periods of time, each country’s currency has a different value. The rate and amount of taxes workers have to pay also probably impacts what a business person must charge for his product.

    Example, a chicken costs less in India than the US, so McDonalds of India sells its chicken McNuggets (pieces) for less than they do in the US. Wages are also lower, so the McDonalds worker in India pays less for the pizza he gets next door. However, the ratio of hours worked to buy a product could be relatively similar from country to country. {Overly simple example: 1 hour wages buys 1 pizza, in every country.}

    Follow up on the internet: Some guy has developed a world economic index based on the prices of Big Macs (hamburger sandwiches) around the world. {No intent to offend if you don’t eat beef.}

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