Today traders have easy access coming in and out of the financial markets anytime and anywhere. But before forex trading has been this convenient, old day forex trading had undergone several debacles. Let us brush through the past and discover the history of forex market and how it all began.
Forex history will tell us how the foreign exchange of the present day has come a long way from where it was hundreds of years back.
The history of forex trading can be traced back during the middle ages, where international banks serve as the trade center for all currencies. This mode of trading paved the way for the Europeans to spread currency trading in all parts of Europe as well as the Middle East.
In 1875, the history of currency trading was etched in the annals of forex history as this was the golden age when the Gold Standard Monetary System was introduced in the heart of trading. Before that system, gold and silver were most commonly used as means of payment internationally.
Currency Trading Game Changer: The Bretton Woods Agreement
The Gold Standard Monetary System seemed to have set the balance in the currency exchange after being the core system of trade. But during World War 1, the Gold Monetary System collapsed and was eradicated.
In 1994, the Bretton Woods Agreement took the place of the defunct gold monetary system as the main standard of convertibility with the U.S. dollar. This was the start of the dollar rising in power.
Several years after the Bretton Woods System was passed to make changes and adjustments in exchange rates of currencies, the International Monetary Fund (IMF) in 1947 was incepted and made the U.S. dollar as the price of gold, which at that time, was fixed at $35 per ounce.
The U.S. concurred to retain the set price for buying and selling gold. Not long enough, the U.S. dollar was hailed as the major currency in the world, which set the market economies worldwide to be set on a dollar standard. Since the Bretton Woods Agreement came in effect, the IMF worked to set up international monetary stability. This prevented the free exchange of currencies among the different countries in the world.
The Birth of Modern Day Forex Trading
The Bretton Woods System made significant changes in the foreign exchange of world currencies, but just like the old gold monetary system, the Bretton Woods System crumbled to ruins in 1971.
Forex history has it that after the fall of the latter monetary system, the modern foreign currency exchange was born. The foreign exchange market became decentralized as the currency trading revolution began. The currency exchange trade volume grew to $70 billion a day during the 80s.
Today the foreign exchange blew up to $1.5 trillion trade volume daily, taking the financial markets by storm.
This has been made possible as trading started to be held online, making all investors and financial corporations around the globe join the foreign exchange markets through different online platforms. It also marked the opening of the markets to retails brokers worldwide to join the foreign currency exchange.
Forex history tells us trading’s humble beginning to where it is today. Trading continues to grow as more investors join the financial markets and continue to make groundbreaking forex history.