The exchange rate needs backing value to be real.
Just out of curiosity.
Can a currency be backed mostly or completely by another currency ? Has anything like that ever happened in history ?
I don't know, I'm seriously asking a question - this is not sarcasm or anything.
Gold was being used as a currency then FRN were created and backed by that currency, then that backing was removed and they kept being used out of habit and/or force. Does that count? And now some nations currency are backed by FRNs.