Thursday, March 8, 2012

History Of Forex: Establishment Of Forex Market

Forex Market was set up by the Bretton Woods agreement in 1944, which aims was to fix the rate of currencies against the dollar. This precedent was first put into practice in 1967, when a bank in Chicago refused to fund a loan to a professor in sterling pound. Of course, his intention was to sell the currency, which he felt was priced too high against the dollar, then buy it back later when the value had declined, turning a quick profit.


After 1971, when the dollar was no longer convertible to gold and the domestic market was stronger, the Bretton Woods agreement was abandoned, and the currency conversion process became more variable. This allowed for a stronger backing in the foreign markets, and the United States and Europe began a strong trade relationship.

In the 1980s, the market hours and usage was extended through the use of computers and technology to include the Asian time zones as well. At this time, foreign exchange equaled about $70 billion a day.

Today, about thirty years later, the trade level has skyrocketed, with trade equaling close to $1.5 to 3.0 trillion daily.

Originally, trading across international lines was more difficult, with several different currencies involved across Europe. Though the major players in the European market were deeply involved in and veterans of international trade by the time other markets joined in, there were more currencies to keep track of – the franc, the pound, the lira, and many more – than was reasonable.

With the birth of the European Union in 1992, the wheels were set in motion to create a single currency that would be used across most of Europe, and the Euro was finally established and put into circulation in 1999.

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