The History Of Forex Trading

Forex History

Trading

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Exchange Rate History

Forex Trading

The History Of Forex

The origin of Forex trading traces its history to centuries ago. The need for different currencies and their exchange had existed since the Babylonians. Speculation did not happen in those days. The value of goods was expressed in terms of other goods also called as Barter System. The main disadvantage of such a system was that it was not an accepted mediums of exchange. It was important that a common base of value could be established. Soon various metals particularly gold and silver, established themselves as an accepted means of payment and a store of value.

The first coins were used at the times of the pharos and the first paper notes were introduced by the Babylonians.

Before the First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses. It would require to import a great deal from out of the country until it ran down its gold reserves needed to support its money.

The Bretton Woods System (1944-1973) began after the instability of World War II. Many European countries were left in ruins after the war ended. On the other hand the US's economy was left stable and strong. The Great Depression and the removal of the gold standard in 1931 created a serious drop in Forex market activity. From 1931 until 1973, the Forex market went through many changes which in turn affected the global economies at the time. Speculation in the Forex markets during these times was little. The Bretton Woods agreement resulted in a system of fixed exchange rates.

After WWII, the USD became the prominent currency mainly because of the war. The Dollar also became the new global reserve currency, and still remains. After the Bretton Woods agreement ended, Free Floating exchange rates came into use. The European Economic Community introduced a new system of fixed foreign exchange rates in 1979, the European Monetary System. London was, and still remains the principal offshore market. In the 1980s, it became an important center in the Eurodollar market. In Asia, currency after currency was devalued against the US dollar, resulting in other fixed exchange rates looking very vulnerable.

In 1994, the first online currency trading was introduced to Forex history. This had a great impact on the development of the Euro currency. By 2002 the Euro became the official currency for 12 European nations, and in the past few years more nations have joined this agreement. Because of the frequent and rising use of Internet technology, modern online forex trading has offered new options for the online trader.

In the beginning, the Forex market worked under the central banks and the governmental institutions but later on it joined hands with various other institutions including commercial banks, corporations, brokerage houses and individual investors. The size of the Forex market is now greater than any other investment market. It is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. The Forex market has now emerged as a lucrative opportunity for the modern day investor.