History of Forex Trading

History of Forex Trading

Currency trading can trace its history back to the middle ages when international commercial banker devised the classification of using bills of exchange. It is however, changes, which occurred throughout the twentieth century that have truly shaped trading in the worldwide currency market we see today.
In the 1930s, the GBP was measured the worlds standard trading currency and was the currency held by many countries as their major 'reserve' currency. London in addition was seen as the world's most important foreign exchange center.
Following the Second World War, however the British financial system was all but shattered and so the US dollar took over as the worlds major trading and reserve currency - a place that it still holds nowadays. This said however, now there are a number of additional currencies, including the Euro and the Japanese Yen, which are also opening to be seen as main reserve currencies.
It was also subsequent the Second World War that a number of measures took place which have been helpful in shaping today's Forex market.
The first of these was the wrapping up of the Bretton Woods Accord in 1944 in which the US, Britain and France granted that they would calm down world currency markets by pegging the main world trading currencies to the US dollar. This accord detained that when the price of a currency fluctuate by more than 1% touching the US dollar the central bank of a country in question had to walk in and buy or sell the currency to carry it back into its 1% bracket.
The Accord also spawns the establishment of the worldwide Monetary Fund (IMF), which is designed to construct a stable scheme for the sale and buy of currencies and to make sure that worldwide currency dealings were conducted easily and in a timely fashion. The IMF also shaped a consultative medium aimed at both promoting worldwide co-operation and facilitating the enlargement of world trade. At the same time, it also broke down many of the exchange restrictions, which were hindering worldwide trade.
The IMF also tasked with building financial possessions available to member states on a provisional basis where this felt to be essential in furtherance of the aims of the IMF. Loans were usually only made only on condition that the government of the country to which a loan was made undertook to make considerable changes to rectify the situation, which had given rise to the need for the loan.
Without any hesitation most major events as far as the Forex market is concerned was seen when the IMF planned that currencies should become 'free-floating' in 1978. This allowed currencies to be traded at a price, which was determined exclusively by the law of supply and demand and that there was no longer any necessity for currencies to be pegged to the dollar or for central banks to interfere in currency trading. Central banks could of course carry on intervening if they wished to do so, but any interference would be completely a matter of choice and would no longer be a obligation as it had been under the Bretton Woods Accord.

The next major event in the history of Forex trading was the origin of the European Monetary System, which efficiently came into being in 1979. The EMS (European Monetary System) got off to something of a wobbly start when Britain did not join the system, although she did later contribute to a degree by joining the European Monetary System's exchange method in 1990.
The final main event to affect the Forex market was the founding of the Euro as the European Union's single currency in 1998 with eleven member states replacing their nationwide currency with the Euro.
Above all, however it was the free-floating of currencies in 1978, which accelerate the growth of the foreign currency market. Back in 1978 Forex trading displayed a daily turnover of around 5 billion US dollars but by the turn of this century, that figure had risen to 1.5 trillion US dollars.