Forex Trading History

Few Notes On Forex Trading History

Forex trading transactions in foreign currencies take place when the currency of a country is purchased or exchanged with another. Forex trading history was based on Gold Exchange Standard and existed during the year 1876 upto World War I. Under the gold Exchange Rule, currencies internationally experienced a new era of stability because they were supported by the price of gold. Forex trading history can be traced back to agreements as early as 1944. The Bretton Woods Agreement, which was established in 1944, fixed the National currencies against the U.S. dollar and set the rate at one ounce of gold to USD35. This agreement is intended at establishing international monetary steadiness by preventing the currencies from being moved between the countries and thereby curbing speculation in the international currencies.

The gold exchange standard had a weakness by its pattern of highs and lows. As an economy strengthened, the tendency was to import finished goods and raw material until its gold reserves was depleted. This resulted in shortage of money supply, causing increased interest rates and slowing down of the economy, to the point of recession. Such highs and lows in the economy existed in the gold standard till World War I, when countries discontinued trade flows and the free flow of gold.

Forex trading history shows an organized start, on the initiation of the Bretton Woods agreement founded after World War II. This was done in order to stabilize and regulate international Forex market. Forex trading history was created when countries agreed to maintain the value of their currency against the U.S. dollar and an equivalent rate of gold as needed. The Bretton Woods agreement was abandoned after 1971 since the U.S. dollar could no longer be exchangeable into gold.

Forex trading history shows that, in 1973, the forces of supply and demand were controlled by the currencies of developed and industrialized nations. Prices of currencies were floated daily, with large volumes, speed and price volatility, increasingly throughout the 1970s. New financial instruments, trade liberalizations and market deregulation emerged during the 1980s and the introduction of computers accelerated the pace of cross-border forex trade.

Forex trading history records

Forex trading history records the increased foreign exchange transactions during the eighties, from 70 billion U.S. dollars to 1.5 trillion U.S. dollars within a span of two decades. The introduction of Euro-dollar market, caused by the unification of the currencies of the European market has only increased the forex trade market by doubling the transactions to almost three trillion dollars. London emerged as a principal off-shore market in the eighties, when the British banks began lending dollars as an alternative to the British pound in order to maintain their leading position in global finance and this was facilitated by their convenient geographical location for operating during Asian and American forex market timings. Forex trading history shows that Europe had after the 1980s emerged as a leading forex market especially after Russia started investing its foreign currency derived from oil sales in the European markets.