The correct answer is It is determined by the market forces of demand and supply.A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.A floating exchange rate means that currencies change in relative value all the time.For example, one U.S dollar might buy one British Pound today, but it might only buy 0.95 British Pounds tomorrow.Additional InformationDemand: Demand is an economic term that refers to the number of products or services that consumers wish to purchase at any given price level.Supply: In economics, supply is the number of goods an individual or business provides to the market.Forex: Foreign exchange is a global market for exchanging national currencies with one another.