History of Forex Trading


The origin of the Forex trade traces its history to centuries ago. There were different coins and need to be exchanged since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation never happened, and certainly the huge speculative activity in the market today would be scorched.
In those days, the value of goods was expressed in terms of other goods (also called the barter system). The obvious limitations of the system encouraged the establishment of more generally acceptable means of exchange. It is important to establish a common value base. In some economies, elements such as teeth, feathers up stones serve this purpose, but quickly various metals, especially gold and silver, have developed themselves as acceptance of payment methods as well as a reliable storage of value. Trade among the populations of Africa, Asia, and so on has been carried out through this system.
Coins were initially minted from the metal of choice in the stability of political systems, and the introduction of the form of government paper I. O. U. During the Middle Ages also gained acceptance. This type of I. O. U. is shown more successfully through force by persuasion and is now the basis of modern-day currencies.
Before the First World War, most central banks supported their currencies with the possibility of converting to gold. However, the standard of gold exchange was its weakness in boom and bust patterns. As the economy strengthens, it imports a great deal of foreign currency even ran its gold reserves required to support money. As a result, the money supply will reduce interest rates Escalating economic activity has slowed to a recession. Ultimately commodity prices have reached the bottom, showing the attractiveness of other nations who race in buying the anger that injected the economy with gold so as to increase the money supply, lower interest rates, and restore wealth in the economy. However, with regard to this type of gold exchange, There was not necessarily a need for a central bank to fully cover the Government's currency reserves. This does not happen very often, but when the group mentality reinforced the idea of ​​the disaster to convert to gold in the panic mass led to the so-called "run on the banks" a combination of increased supply of paper money without the gold to cover led to devastating inflation and political instability output. The Great Depression and the removal of the gold standard in 1931 caused a serious lull in the activity of the Forex market. From 1931 to 1973, the Forex market underwent a series of changes. These changes have affected the global economy in time and speculation in forex markets during these times.
In order to protect domestic national interests, increasing controls have been introduced on foreign exchange to prevent market forces from punishing the lack of monetary responsibility.
Near the end of the Second World War, Bretton Woods reached an agreement initiated by the United States in July 1944. The conference held at Bretton Woods in New Hampshire John Maynard Keynes rejected the proposal to reserve the new world currency in favor of a system based on the US dollar. International institutions such as the IMF, the World Bank, and the GATT were created in the same period as emerging victors in the Second World War searching for a way to avoid destabilizing monetary crises leading to war. The Bretton Woods agreement led to a fixed exchange rate regime that restored the gold standard in part, setting the US dollar at $ 35.00 an ounce of gold and fixing other major currencies against the dollar initially intended to be on a permanent basis.
The Bretton Woods system came under increasing pressure and the national economy moved in different directions during the 1960s. The number of system adapters survived for a long time but eventually, Woods collapsed in the early 1970s after President Nixon stopped gold convertibility in August 1971. The dollar is appropriate as a single international currency at a time when it is under intense pressure from the US budget deficit and trade deficit.
The past few decades have seen the development of foreign exchange trading to the world's largest market. Limitations on capital flows have been removed in most countries, leaving market forces free to adjust foreign exchange rates according to their perceived values.
The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The search for currency stability in Europe continued with the signing of the Maastricht Treaty in 1991. The purpose was not only to set exchange rates but also to replace many of them in euros in 2002. London remained the main foreign market. In the 1980s, it became the main center in the euro-dollar market when British banks began to lend the dollar as an alternative to the pound in order to maintain their leading position in global finance.
In Asia, the lack of steady continuity foreign exchange rates has gained new significance with events in Southeast Asia in the latter part of 1997, where the currency after the devaluation against the US dollar, leaving other fixed exchange rates especially in South America is also looking very weak.
While businesses have had to face a more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The Forex market initially operated under central banks and government institutions but later accommodated various institutions at present it also includes the booming dot com and the global network. The size of the Forex market is now dwindling any other investment market. The foreign exchange market is the largest financial market in the world. The daily trades nearly $ 7 trillion in the foreign exchange market. It is estimated that more than the US $ 5 trillion.

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