<p>Face value is never defined by other currencies.</p>
<p>Face value by definition is the value that is printed on the money and can be chosen arbitrary. Face value of 10 dollar bill is 10 dollars.</p>
<p>Value of a currency in terms of other currencies (i.e. the exchange rate) is determined either:</p>
<ul>
<li><p>by market forces (supply and demand) if it’s free floating currency.</p>
</li>
<li><p>by central bank/government body in case of fixed exchange rate.</p>
</li>
<li><p>some combination of the above of the currency is allowed to float within some range (e.g. the famous snake in the tunnel).</p>
</li>
</ul>

CC BY-SA 4.0
2024-01-05T12:37:06.963Z
What you say is accurate regarding existing currencies. It is rare that a new currency is introduced (so we don't have many examples). When it is, how do you think that the "arbitrary" face value is chosen ?
noob2
CC BY-SA 4.0
2024-01-05T13:27:53.807Z
your answer does not necessarily answer the question, so let me rephrase: if you would now coin your own hypothetical currency, how would you define what is the worth of 1 unit?
enzo
CC BY-SA 4.0
2024-01-05T15:11:47.577Z
@enzo that is what the second part of the answer answers. You can't define yourself how much something is valued. That is determined by market forces (i.e. by all people interesting in the thing collectively through their behavior). In fact even in fixed exchange rate central bank works with market forces (manipulating supply) so they get some exchange rate they want. The value of currency within economy (inverse of price level) is also determined by market forces, countries don't just choose it
1muflon1
CC BY-SA 4.0
2024-01-05T15:19:37.537Z
@noob2 new currencies are not that rare, they are not created just when new countries are born but also when countries go through monetary reform. When they are created central bank chooses face value for banknotes and coins depending what they think people will use. When people stop using some coin or note is used in a way they don't approve it might be retired. For example, many EMU countries already retired 1 and 2 cent coins and probably all EMU countries will retire them completely. EMU might also retire 500e bill because its used by criminals too much
1muflon1
CC BY-SA 4.0
2024-01-04T18:23:36.070Z
2024-01-04T18:23:36.070Z
1muflon1
<p>When a new currency is issued, be it backed or not, its face value, i.e. the value of a single unit of the currency, has to be defined somehow.</p>
<p>For example, when the Euro was introduced in 1999, it was fixed to the ECU/EUA (a unit of a hypothetical currency somehow related to currencies in Europe, to monitor their exchange), which itself was related to gold in the 50s at a rate of approximately 1 per 0.89grams of gold.
But the worth, or purchasing power of that currency, and thus of &quot;1€&quot; is to some degree arbitrary. Still the Euro was within one order of magnitude of other major currencies (Dollar, DeutscheMark) at that point in time.</p>
<p>If a new currency was issued today for some reason, how would you define its face value of 1 unit in terms of other major currencies?
If there is no definitive answer, what would be a good approach to chose a face value?</p>

CC BY-SA 4.0
2024-01-04T15:47:50.670Z
I’m voting to close this question because it belongs to Economics Stack Exchange.
Daneel Olivaw
CC BY-SA 4.0
2024-01-04T16:19:45.497Z
The German public was very reluctant to relinquish the DEM. They would have been very unhappy with a Euro value substantially lower than 1 DEM, which they associated with weak and trouble-prone european or third world currencies (see Mr. Vulis' link). They were OK with $1 EUR \approx 2 DEM$, "look the EUR is going to be even heavier and better than our beloved DEM and in line with the USD".
noob2
CC BY-SA 4.0
2024-01-04T17:21:18.010Z
Migrate made Mr. Vulis’ link disappear: https://economics.stackexchange.com/questions/41510/is-there-any-pressure-to-keep-currency-exchange-rates-around-1/41511#41511
Bob Jansen
<currency><exchange>
What defines the face value of a new currency?
enzo
# What defines the face value of a new currency?

(Asked by: username_0 on 2024-01-04)

When a new currency is issued, be it backed or not, its face value, i.e. the value of a single unit of the currency, has to be defined somehow.

For example, when the Euro was introduced in 1999, it was fixed to the ECU/EUA (a unit of a hypothetical currency somehow related to currencies in Europe, to monitor their exchange), which itself was related to gold in the 50s at a rate of approximately 1 per 0.89grams of gold.
But the worth, or purchasing power of that currency, and thus of "1€" is to some degree arbitrary. Still the Euro was within one order of magnitude of other major currencies (Dollar, DeutscheMark) at that point in time.

If a new currency was issued today for some reason, how would you define its face value of 1 unit in terms of other major currencies?
If there is no definitive answer, what would be a good approach to chose a face value?

**Tags:** currency, exchange
> **Comments:**
> **username_1**: I’m voting to close this question because it belongs to Economics Stack Exchange.  
> **username_2**: The German public was very reluctant to relinquish the DEM. They would have been very unhappy with a Euro value substantially lower than 1 DEM, which they associated with weak and trouble-prone european or third world currencies (see Mr. Vulis' link). They were OK with $1 EUR \approx 2 DEM$, "look the EUR is going to be even heavier and better than our beloved DEM and in line with the USD".  
> **username_3**: Migrate made Mr. Vulis’ link disappear: https://economics.stackexchange.com/questions/41510/is-there-any-pressure-to-keep-currency-exchange-rates-around-1/41511#41511  

---

## 1 answers

### Answer by username_4 on 2024-01-04. Score: 1

Face value is never defined by other currencies.

Face value by definition is the value that is printed on the money and can be chosen arbitrary. Face value of 10 dollar bill is 10 dollars.

Value of a currency in terms of other currencies (i.e. the exchange rate) is determined either:

* by market forces (supply and demand) if it’s free floating currency.
* by central bank/government body in case of fixed exchange rate.
* some combination of the above of the currency is allowed to float within some range (e.g. the famous snake in the tunnel).

> **Comments:**
> **username_2**: What you say is accurate regarding existing currencies. It is rare that a new currency is introduced (so we don't have many examples). When it is, how do you think that the "arbitrary" face value is chosen ?  
> **username_0**: your answer does not necessarily answer the question, so let me rephrase: if you would now coin your own hypothetical currency, how would you define what is the worth of 1 unit?  
> **username_4**: @enzo that is what the second part of the answer answers. You can't define yourself how much something is valued. That is determined by market forces (i.e. by all people interesting in the thing collectively through their behavior). In fact even in fixed exchange rate central bank works with market forces (manipulating supply) so they get some exchange rate they want. The value of currency within economy (inverse of price level) is also determined by market forces, countries don't just choose it  
> **username_4**: @noob2 new currencies are not that rare, they are not created just when new countries are born but also when countries go through monetary reform. When they are created central bank chooses face value for banknotes and coins depending what they think people will use. When people stop using some coin or note is used in a way they don't approve it might be retired. For example, many EMU countries already retired 1 and 2 cent coins and probably all EMU countries will retire them completely. EMU might also retire 500e bill because its used by criminals too much  

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