International students or frequent traveller would often take advantage of doing large purchases in the cheapest airport. But more importantly, exchange rates is an important financial lever.
Recent interesting story from the Economist:
A new Plaza for global currencies wouldn’t work
Just being curious, so a quick Google tells me: exchange rate is the price of currencies so technically it should also follow the supply and demand rule. Different mechanism operates in different time magnitude:
- The purchasing power parity theory: a burger costs 6 in Chicago and 600 in Tokyo then the EX rate should be 0.01
- The trade clock: a country running a big trade deficit is defacto selling its own currency, which should push its rate down til the trade dicifit self-correct.
- The asset clock: global trade in goods and services runs maybe $30-odd trillion *a year*. FX turnover is $12 trillion a day. Trade-related currency demand is a rounding error; the overwhelming majority of currency trading is people buying currencies in order to buy assets.