History of Forex

Market for foreign exchange transactions exists as long as there is money. Thousands of years before Christ in Egypt were first metal money and from that point we can talk about the first foreign exchange transactions.

Currency exchange operations in their current understanding, began to develop in the Middle Ages. This was associated with the development of international trade and navigation. The first currency dealers are considered Italian moneychangers who earned on the exchange rates of different countries.

Gradually, the market for foreign exchange transactions are modified, becoming more and more clearer. The most significant change in the development of the foreign exchange market were made in the twentieth century. Gaining market modern features began in the 70′s of the 20th century, when it was taken off the system of fixed exchange rates of one currency against another.

After the removal of restrictions on currency movements, a new type of business, which is based on a profit in a free system of exchange rate changes. And the change of course driven by all sorts of market conditions and is controlled only by supply and demand.

The main stages of development of the market Forex (according to the Encyclopedia of Contemporary)

30th years of XX century. The world financial crisis. There is a destruction of trade and economic ties. Gone are the rule of the gold coin standard. By the mid-30′s London is a global financial center. British Pound at that time was the main currency for trade and the creation of reserves. Even then, British slang called «Cable». This name refers to the fact that the means of communication in transactions was the telegraph and the information transmitted by cable.

In 1930, in the Swiss city of Basel was established Bank for International Settlements. To create a financial support of the newly independent states and countries experiencing temporary balance of payments deficit.

1944. The U.S. was the Bretton Woods conference. It is considered the end of the US-British rivalry. The conference was attended by two major figures: John Maynard Keynes (England) and Harry Dexter White (USA). They manage to create and adopt a new order for the world financial system in the circumstances.

The main provisions of the Bretton Woods system

The International Monetary Fund is the most important institution in control of the international financial and economic relations;

Proclaimed currency, which play the role of international reserves (U.S. and de facto sterling);

Adjustable parities of currencies to the U.S. dollar (possibly rejection — 1%), the dollar pegged to gold (ounce of gold — $ 35);

IMF members have the right to change parities only with the consent of the IMF;

Upon completion of the transition period, all currency must be convertible, to comply with this principle, all governments are obliged to keep international reserves, if necessary — to make interventions in the currency markets.
IMF members make the payment currency and gold.

1947. To pause the onset of communism in the United States adopt the program to European economies. U.S. Secretary of State Marshall, in his report outlines a plan under which the European economy to improve your health to the point where it can independently maintain its military capabilities. One of the problems is the satisfaction of «dollar famine.» If in 1949 the U.S. dollar obligations Europe were 3.1 billion, in 1959 they reached 10.1 billion dollars.

By 1958, most European countries have announced the free convertibility of their currencies.

1964. Japan announced the convertibility of its currency.

After the announcement of the convertibility of major currencies, it became clear that the U.S. is no longer able to maintain the price of $ 35 per ounce of gold. Dollar inflation was a threat to the United States. The Kennedy administration, a number of incorrect actions — a tax on the interest rate differential, which increases the costs of foreign borrowers, and a program of voluntary restrictions on foreign loans. Taxes and limiting the impetus for the emergence of a new market — the Eurodollar market.

1967. Devaluation of the British pound, which caused the final blow to the illusory stability of the Bretton Woods system.
In the 60th year of the U.S. balance of payments deficit leads to a reduction in gold reserves from 18 to 11 billion dollars. At the same time the growth of the external debt is U.S..

1970. In the United States sharply reduced interest rates, which generate strong dollar crisis. In a short time a massive outflow of capital from the U.S. to Europe, where interest rates were higher.

May 1971. Germany and the Netherlands announced a temporary free floating their currencies.

August 1971. Growth in the U.S. balance of payments deficit has forced President Richard Nixon suspended the convertibility of dollars into gold.

December 1971. The meeting at the Smithsonian Institute in Washington, has been made the last attempt to save the Bretton Woods system. Interval deviations of exchange rates from parity was increased to 4.5%.

Keep the boundaries of the interval was very difficult. And some time later, the Bundesbank had intervened in the amount of $ 5 billion. It was a huge sum at the time, but it did not bring success. Currency exchanges in Europe and Japan had to temporarily close, and the U.S. announced a devaluation of the dollar by 10%.

Developed countries have stopped supporting the fixed parities and gone to the currency float.

1973-1974. In the United States phased out the tax on interest rate differential and the voluntary restrictions on foreign loans.

The Bretton Woods system ceased to exist.

In recent years, the Bretton Woods system of currency traders to extract more speculative profit in periods that followed the termination of central bank intervention. After abandoning the fixed rate of the possibility of extracting those profits are strongly limited. Many banks have suffered large losses, and two well-known — «Bankhaus Hershtadt» in Cologne and «Franklin National» in New York — even gone bankrupt because of failed speculation.

1976. Jamaican held Conference (Kingston). Representatives of the world’s leading states formed new principles of the global monetary system. States had rejected the use of gold as a means to cover the deficit in international payments.
The main elements of the new system are the inter-state organizations, regulatory monetary relations, currency convertibility. Means of payment are the national currencies. The main mechanism by which the international currency transactions, serve commercial banks.

1978. Implementing the European Monetary System (EMS). The core of EMU is a grid of cross-currency with the central and boundary values ​​of the exchange rate. Overall, EMU like Bretton Woods. If the cross-rate closer to the border, both parties are obliged to intervene.

Key currency EMU — doychmarka.

1985. ECU gradually becomes not countable, and the physical instrument. Issued denominated in ECU traveler’s checks and credit cards, banks offer deposits ECU.

January 1999. In the market, a new European currency, which replaced the ECU. 11 European countries have fixed exchange rates against the Euro. The European Central Bank began to manage monetary policy of the European Monetary Union (EMU).

In 1999, as the European currency the euro was introduced. The exchange rates of currencies of 11 European countries participating in the agreement with respect to the Euro (EUR).

Fixed exchange rates-states of the European Monetary Union for the Euro:

EUR / LUF 40.3399 Luxembourg franc
EUR / BEF 40.3399 Belgian franc
EUR / IEP 0.787564 Irish pound
EUR / FIM 5.94573 Finnish mark
EUR / PTE 200.482 Portuguese escudos
EUR / ESP 166.386 Spanish peseta
EUR / ITL 1936.27 Italian lira
EUR / FRF 6.55957 French francs
EUR / DEM 1.95583 Deutsche Mark
EUR / NLG 2.20371 Dutch guilder
EUR / ATS 13.7603 Austrian schilling

Euro was released as banknotes of 5, 10, 20, 50, 100, 200 and 500 units and coins 1 and 2 euro and 50, 20.10, 5, 2 and 1 cent.


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