The value of one country’s currency with respect to another country refers to the exchange rate. Usually, there are two components to this: the domestic currency and the foreign currency. How much foreign currency you will get for a certain amount of your domestic currency is based on that day’s exchange rate. This exchange rate is based on factors like inflation, debts, interest rates and economic performance, against other things.
For example…
Let’s say Peter is travelling to Japan and Russia. His country’s domestic currency is not doing that well against either of these two currencies at that time, which means using the current exchange rate will result in him losing more money. Luckily, Peter has some US dollars too. The US dollar is strong against the Japanese Yen and Russian Ruble. This means the exchange rate is favourable for his purposes and he will get more Yen and Ruble for his US dollar than if he converted his domestic currency to the Yen and the Ruble.
