RMB VS KOREAN money

Theory 1 - Determination of exchange rates - why do they go up and down?
An exchange rate is a price - exactly the same as any other price - the amount you have to give up to acquire something else - in this case another currency. So an exchange rate is the price of one currency in terms of another. In other words it is the price you will pay in one currency to get hold of another. The price can be set in various ways. It may be fixed by the government or it could perhaps be linked to something external - for example, gold. However, the most likely alternative is that it will be fixed in a market. Since it is a price, it will be determined, like any other price, by demand and supply. This is the supply and demand of pounds traded on the foreign exchange market and is NOT the amount of sterling in circulation! A high level of demand for a currency will force up its price - the exchange rate. Where supply is equal to demand is the equilibrium exchange rate, as shown in the diagram below.
The demand for £ comes from people who are investing in the UK from abroad and so need pounds, or from firms who are buying UK exports. They will need pounds to be able to pay for the goods. The supply comes from people in the UK who are selling pounds. This may be because they have bought goods from overseas (imports), or it may simply be that they are investing in another country and so need the local currency. To get this they have to sell pounds in exchange for the other currency.
The equilibrium rate is where supply is equal to demand, and this will change as supply and demand changes. Say, for example, that interest rates increase. This will tend to attract more overseas investment into the UK. To invest here, they will need to buy pounds, and so the demand for pounds will rise. We can see this on the diagram below:

As we can see, both the exchange rate and the volume of currency traded have increased. This will not inevitably be the effect as there may be other factors affecting the exchange rate at the same time. A lot will also depend on whether the foreign exchange market expected the interest rate increase or not. However, supply and demand gives us a very useful tool for analysing movements in the exchange rate.