History of Forex Part-1

History of Foreign Exchange

The history of foreign exchange greatly differs from that of other financial markets around the world. In this connection it would be relevant to mention the words of a sapient  man who considered that it’s really important for one to know and remember the history and the past of his antecedents, otherwise he’ll  always remain a child. If we try to relate this idea with  Forex  market it would mean that unless one is aware of how  it  came into being he will always remain a novice.  So the fundamental points of Forex history and its beginning are given below.

The Gold Standard

The term “Gold Standard" is hardly unknown to anyone. It stands for indicating something which is the best. It came forth in 1875 as a currency system. In this period countries made decision to fix the exchange rate by gold. So, currencies as backed by gold appeared. The country ought to have certain amount of gold for the given currency whether it’s dollar or not.

Bretton Woods System

Countries were short of money in the period of  World War I and World War II. Some countries like United States and Germany, that were included in the wars,  for some period of time didn’t make use of “Gold Standard” , and in order to provide sufficient money for wars they printed up more money.
Seventy representatives from the Allies made a decision in 1944 to create such a financial system that would give all dominant countries an opportunity to be integrated  in it. They made a system covering fixed exchange rates for currencies. They substituted the “Gold Standard” with US dollar making the latter overall reserve currency. The rest of the countries consequently estimated the value of the dollar.
Bretton Woods also contributed to the  formation of International Monetary Fund or IMF, the International Bank for Reconstruction and Development and the General Agreement on Tariffs and Trade.
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