Forex and its history
Trade in money dates back to the early Middle Ages, when international trade took its first shape. Medieval merchants and bankers were the first to invent exchange vouchers for the development and flexibility of international trade. The modern currency exchange market, characterized by periods of high volatility and relative stability, was not formed until the 20th century.
In the mid-1930s, the capital of the United Kingdom – London became the leading currency exchange centre, and the British pound became a very strong currency. It was in those times that the British pound gained its cable nickname. After the Second World War, the British economy was in ruins, while the United States, not destroyed by war, gained a strong economic position.
Under the Bretton Woods agreement (1944) between the United States, the United Kingdom and France, the US dollar became the base currency of the capitalist countries, making all other currencies tied to the US dollar and the US dollar in turn tied to the gold at a rate of $35 per ounce.
In this way, the dollar has become the base currency of the entire financial world. The same agreement also gave rise to the International Monetary Fund, which made a significant contribution to the financial transformation of the former socialist countries.
Beginning of the Forex Exchange
In the 1970s, exchange rates were freed from gold prices. Their volatility caused by demand and supply on the market and the fact that everyone could exchange any amount of currency, gave rise to the currency exchange (Forex), which we know today.
Since the release of prices, when they have changed their courses to each other without any obstacles, Forex has spectacularly increased its turnover over the next 30 years. Daily Forex trading volume in 1977 was $5 billion and grew dynamically to reach $600 billion in 1987, exceeded $1 trillion in 1992 and finally stabilised at around 1.5 trillion in 2000.
Such dynamic development was caused by many factors. The most important are technological developments, the growing influence of central banks and increasing competition in commodity markets. The development and use of the Internet and computers in trading has also increased interest not only in Forex, but also in other capital markets.
Currency on the Forex market
At present, the most frequently traded currencies on the Forex market are: – the following currencies.
USD – American dollar
GBP – British pound
JPY – Japanese yen
CHF – Swiss Frank
AUD – Australian Dollar
NOD – New Zealand dollar
These currencies are formed by so-called major currency pairs.