History Of Forex

The origin of Forex trading may be traced to many centuries ago.

In early days, the barter system, where the value of goods was expressed when it comes to other goods, was widely common. The obvious constraints of the barter system stimulated the creation of more generally recognized medium of exchange with a common base worth.

Folks of Asia & Africa used stones, feathers and even teeth, but soon coins made from metals including silver and gold, became an accepted means of payment. After in the middle ages, paper form of governmental I.O.U was used by specific established states, which forms the basis of today's monies.

Gold Standard

In international trade the quantity of gold that might be purchased for it defined the value of money. This method was called "Gold standard." At those times the most powerful money in the world was the British Pound. This system worked fairly well until World War I.

During the war, when the expenses of the European countries improved considerably, the gold standard was abandoned by all except USA. Although the European countries tried to return to the gold standard after World War I, the Great Depression, the world financial crisis, and the World War II stood in the way of those plans.

Bretton Woods System

Before the ending of World War II, the Allied countries felt the need to set up a monetary system to fill the "Gold Standard" emptiness. So, in July 1944, the Allies assembled at Bretton Woods, New Hampshire, to formulate the Bretton Woods system of international financial management, which instituted the following:

Fixed exchange rates system
U.S. dollar to become a main reserve currency instead of gold
The creation of three international bureaus:

o International Bank for Reconstruction and Development

o International Monetary Fund (IMF)

On August 15, 1971, U.S. President Richard Nixon closed the gold window, declaring that it'd no longer exchange gold for the U.S. dollars as the treasury lacked adequate gold. This marked the end of Bretton Woods System.

Present Exchange Rates

The world at last accepted the usage of floating foreign exchange rates during the Jamaica arrangement of 1976, removing using the gold standard, following the Bretton Woods system broke down. Most authorities employ one of the following three exchange rate systems which are used till date:

Managed floating rate

Today Forex has become one of the largest world markets (average daily dollar volume of USD 4 trillion) with enormous growth potential.

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