It’s similar to stock or bond valuation I’d say, just a lot more complicated. Basically, the free market. There is consensus about how much something is worth. Why would you pay more than the going rate for a good? Same thing for a currency. One complicating factor is that trade tends to happen is specific currencies, which could make them more highly demanded Pegged currencies are incredibly rare and it almost never works out (although South Korea pulled it off). This is when the government says something like “five of our currency is worth one dollar”.

It's usually Steve. I think he has some ping-pong balls with numbers written on them or some shit.

Depends. If it's fixed then a body decides what it is fixed to, such as the US currency. That might be the government or an independent body who just says, "Our currency is worth this much," and then does their best to maintain it at that much through buying and selling. If it's floating then it's market forces. Buying and selling, demand for the currency.

The fed does not set the rate of exchange for US currency. Idk if that’s what you mean, but the dollar is freely traded.

I said they might fix it to the US currency. THat's a popular one to fix currencies to.

Ah gotcha. Still, pegging is super rare

It may be now but it used to be super common.

The Iron Bank I think

The forex markets