Currency valuation refers to the process of determining the worth of one currency in relation to another. This value can fluctuate based on various factors, including economic indicators, interest rates, and political stability. For example, the value of the US Dollar may rise or fall against the Euro depending on changes in the economies of the United States and European Union. Different methods are used to assess currency valuation, such as the floating exchange rate system, where market forces dictate value, and the fixed exchange rate system, where a currency's value is tied to another currency or a basket of currencies. Understanding currency valuation is essential for international trade, investment, and economic policy.