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, (...) Does that count? And now some nations currency are backed by FRNs.
I am not sure, but i guess yeah.
However that wasn't "clean case", because FRNs were also "legal tender" so that kind of adds purchasing power the the currency.