Exchange rates are determined by supply and demand. For example, if there will be greater demand for American goods then there will tend to be an increase in value of the dollar. If markets will worry about the future of the US economy, they will tend to sell dollars, leading to a fall in the value of the dollar. Currency changes affect you, whether you are actively trading in the foreign exchange market. When it comes to the decision of whether you should buy or sell dollars, it all boils down to how the economy is performing.
A strong economy will attract investment from all over the world due to the perceived safety and the ability to achieve an acceptable rate of return on investment.