Interactive simulator
Exchange Rate Simulator
A floating exchange rate is the price of one currency in terms of another, set by supply and demand in the foreign-exchange market. This simulator models dollar-euro trading: raise US interest rates and capital inflows shift demand for dollars right, appreciating the dollar. Try a trade-deficit shock or a central-bank intervention and watch the rate move. In this release this page is powered by the closest available interactive widget; a dedicated widget for this topic is planned.
Equilibrium solves Qd = Qs, so P* = (a − c) ÷ (b + d). Shifting demand changes a; shifting supply changes c. A ceiling only bites when set below P* (creating a shortage); a floor only bites when set above P* (creating a surplus).
How to use it
Shift demand for dollars to model capital-flow changes.
Shift supply to model import-demand changes.
Read the new exchange rate and identify appreciation or depreciation.
What you will learn
- Explain how supply and demand set floating exchange rates.
- Connect interest rates to currency values.
- Distinguish appreciation from depreciation.
Model notes
Purchasing-power parity and interest-rate parity are referenced, not enforced; expectations and speculation are omitted. Illustrative only, not a trading tool.