Suppose you travel from the US to Japan and trade some American dollars for Japanese Yens. You will notice there is an exchange rate, say 100 Yens for 1 US Dollar. You may also notice the exchange rate varies from day to day. Do you know why?
Before, all the currency was backed in gold. That means that the value of gold was fixed. In the 1930's, 1 oz of gold was worth 35 US Dlls. After WW2 many countries based the value of their currencies
on the US Dollar and since everyone knew how much a dollar was worth in gold they could easily base the value of their own currency against the dollar gold value. To make it simple, if an oz of gold in the UK was worth 2 Pounds that means 2 Pounds could buy 1 Dollar.
After a while the US Dollar was affected by inflation. That means that one dollar could no longer buy the same amount of goods it did before. In 1971 the US government was forced to eliminate the gold standard.
Now the value of the dollar is measured by comparing it to other currencies. Tom Eraway is a fulltime online stock and Forex trader. To see how you can start making $200/day starting from day 1 without any effort on your part go to http://www.make-money-with-forex.info. Start to make money with Forex now.
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