September 1, 2010, 11:55 pm
Are all the different currency pairs in the world relative to all the other currencies, or relative only to the other currency in a particular pair. In other words is it, (metaphorically speaking), like a load of elevators representing the values of all the world currencies, going up and down in comparisum to each other, or only 2?
So if, for example, the dollar had fell against the pound by exactly 1% in 1 day, and the yen had fell against the dollar by 1%, would that by definition mean that, (A), The yen would have had to have fallen against the pound by roughly 2%?, or, (B), It could have gone up, or done anything it liked against it?
If A is true, then they are all interconnected. If B is true then they are all independant. So which is it?
Also just to note, i am aware that currencies are roughly connected in the sense that they can all be affected by economic circumstances in the US for example, but i'm only asking for a technical definition in this case. Thanks in advance!