How does one determine the value of a currency?

I don't understand how a piece of paper, say the U.S. Dollar, can found to be of some given value if it's not backed up by anything like say gold. Furthermore, in a world full of all this fiat money, doesn't there have to be some absolute standard that all other currencies are valued in terms of? How is it possible to have so many currencies valued with respect to each other on a floating basis with no absolute reference?How does one determine the value of a currency?
Good question!





I look at it this way: How much gold will a US Dollar buy?





At the moment it takes approximately $868.20US to buy a troy ounce of gold. I suspect that next year, it may take more.





GrandpaHow does one determine the value of a currency?
come on, thats not a real answer...Why does the dollar cost x number to buy one troy ounce and a another currency cost Y? WHY? For ex, Is it just the overall number of investors that buy and sell currencies (demand and supply + the total amount of currency the country has in reserve??

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