A country’s currency, whether it is paper money or coins made from precious metals, is what people use to pay for goods and services. A currency’s value reflects its status as an internationally accepted medium of exchange, and it fluctuates continuously. Modern currencies are mainly issued on paper, and a few are minted into physical coins. The terms money and currency are often used interchangeably, but they have different meanings. Money is a broader term that refers to the intangible system of value that makes the exchange of goods and services possible, and a currency is one tangible form of money.
Unlike bartering where each good or service has a fixed value, currency provides a common standard that can be easily transferred from person to person. The idea of using paper for this purpose first emerged in China as early as 1000 B.C.E., but it took a long time for it to become popular. Today, currencies are available in a wide range of denominations and are backed by varying levels of government support.
When the economy of a country is doing well, its currency will tend to rise in value. This is because more foreign investors will want to invest in the country, and this drives up demand for its currency. On the other hand, if the country has large debts or political/economic instability, its currency will fall in value because it is less attractive to investors. Most of the $3 trillion worth of currency that is traded daily is done by international investors, such as pension funds, mutual funds, and banks that manage the savings of others.