On what basis is a nation's currency decided? E.g UK - y is its currency so strong? what decides it?
Answer:
The exchange rate of the dollar is based entirely on supply and demand ("floating" currency). This is not the case with all currency; many pin the value on some other currency, as is the case with the Japanese yen, which is pinned to the dollar. The third type is the "dirty float", which has characteristics of both.
The mechanics of supply and demand are very complicated, but can be simplified if we assume exchange between two nations only. An exchange rate rises when either the demand of the currency rises or the supply of the currency falls. The reasons for this is also complicated and is better left to an economics course.
Currency exchange rate is not linked to GDP directly. Consider the scenario: You want to buy French wine for 1 euro. However, in order to do so you must have an euro, and you would thus be willing to exchange dollars for it. How much you want the wine (your "demand" for it) establishes how many dollars you would exchange for an euro, and thus sets the exhange rate. This is the basic concept which supply/demand exchange rate works.
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