A Synopsis Of Forex Market History
Forex market history is quite a fascinating topic, much more than most people would expect.
At the start of the 20th century, world currencies had wildly varying degrees of acceptance and rates of exchange and for many traders this created a multitude of problems which were very difficult to address. However, this lack of an agreement on monetary and financial systems continued to remain a problem.
During the latter stage of the Second World War, Allied victory became imminent. Also evident was the need to rebuild the shattered economies of the world, as the strain on the Allies would soon be too great if they alone took the entire responsibility for the economic burden of post-war reconstruction. Forex market history was soon to be made.
With the war not yet over, the Allies convened at Bretton Woods, New Hampshire in the United States for the United Nations Monetary and Financial conference. The Bretton Woods agreement was signed on July 1944, a little over a year before the Allies were completely victorious. The agreement paved way for the creation of the International Bank for Reconstruction and Development and the International Monetary Fund as well as the World Bank. Forex market history would soon be changed in earnest. Under the Bretton Woods system, all countries were required to have currency to have a fixed value in relation to gold. For quite some time it worked remarkably well at keeping conflict in check and at minimizing the confusion that had ensued before the agreement. Some countries however, abandoned the system after finding it unworkable. The United States finally abandoned the system in 1971 due to several factors, ranging from its budget deficit and the decreased value of gold due to printing of fiat money and unfavorable tax rates. Forex market history tells us in any case that this act by one of the superpowers finally ended the relevance of the Bretton Woods system. After the collapse of the Bretton Woods system, most currencies were now free-floating. This meant that the US dollar, along with other major currencies like the British pound were valued solely based on market demand and supply. Other currencies however, were pegged to the US dollar, even to this day. These include the Chinese Renminbi and the Japenese Yen. This allows China and Japan to keep their currencies undervalued to help keep favorable conditions for exports. Another major development that began in the 80s and continues today is the Euro-dollar market. As of now, most US dollars are traded outside the United States. Banks in Great Britain started trading in US dollars in the 80s in order to exploit the geographical advantage they had, namely the fact that their markets were open when US and Asian markets were. Euro-dollars continue to be an important factor in today's world. Forex market history would be lacking if the emergence of the Euro as one of the worlds premiere currencies and the elimination of many of the old currencies of Europe is ignored. The Euro has changed the whole dynamic of forex trading. This is especially evident now that the US dollar is greatly devalued; Euros are starting to take a large share of the currency market. Finally, not to be to be ignored in forex market history is the development of technologies such as computer networks that have made possible fast and efficient transactions and data gathering that gives traders capabilities they have not enjoyed in years before. Technology has made it possible for dramatic changes to occur in mere seconds.
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