ednut1:
in the past currency was linked to gold prices, and the British dominated the world before world war 2, that has stopped but the pound value jst carried on from there, am nt an economist

ernie4life:
Nice questions

Lots of factor come to play in determining the value of a currency, I will pick a few and discuss

Demand and Supply
In simple terms demand is requesting while supply is giving, when the currency of a country is in high demand the value of that country's currency is bound to appreciate, your next question will be how do you determine when a country's currency is in high demand? when you want to buy goods from  Canada for instance, you have to convert to that currency to make such transactions because your home country's currency has no value outside it's place of origin, so the more you buy from that country you are directly increasing your demand for that country's currency, invariably you are contributing to the increase of that country's currency value  and this will cause that country's currency to appreciate in value. On the other hand you are giving out your own home currency( that's supply) and this will cause the value of your currency to depreciate.

Now the law of demand and supply states " the higher the demand the higher the price and the higher the supply the lower the price( "ceteris paribus" is simply saying that as long as all other factors that could affect the outcome remain constant). 

So the more you are demanding another country's goods you are indirectly contributing to the appreciation of that country's currency while that of your country is depreciating 

To summarise this the more you buy from another country the more that country's currency is appreciating.

During colonial rule Nigeria was a  major producer of raw materials for the industries in other countries, and those countries needed those raw materials to keep up with production this made Naira's value appreciate but now the reverse is the case that's why the value of Naira is falling, we import virtually every thing from machines, skilled labour to foods etc so tell me why the value of Naira won't fall while that if China and other industrialised countries appreciate

Any questions before I move to the next factor? 

MrKnowitall:
Money is backed by gold. I could go into further explanation but im not sure you have the time.

handsum92:


Please go ahead...I'm ready to learn from you sir