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A Brief History Of Trade Forex

The history of trade forex traces its origin to centuries ago. Walk with me as I take you a trip back to where it all started.

Ever since the Babylonians, there did exist the need to exchange different currencies and goods. The value of goods was expressed in terms of other goods then. The economy was based on barter between individual market participants.

Trade forex history depicts that in then existing economies, which had its own limitations, everything from feathers to teeth to pretty stones has served the purpose. Soon metals, particularly gold and silver, were established as an accepted means of payment as well as storage of value.

Early coins were simply minted from the desired metal. The introduction of a paper form of governmental IOUs only gained consensus during the Middle Ages. One can say these formed the basis of modern currencies.

Most central banks, before World War I, supported their currencies with fungibility to gold. Although paper money could always be exchanged for gold, this did not occur often in reality. There were times when the rising supply of paper money without gold cover led to upsetting inflation and resulting political uncertainty. Foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility to protect local interests, according to the history of forex trade.

After the World War II, the Bretton Woods agreement in July 1944 under the leadership of the USA suggested for a new world reserve currency in favor of a system reinforced on the US dollar. Other international institutions like the IMF, the World Bank and GATT were also formed in the same period. The Bretton Woods agreement promoted a system of fixed exchange rates that partly reinstated the gold standard.

Trade forex history shows that during the sixties, the Bretton Woods system came under mounting pressure as national economies moved in various directions. The Bretton Woods disintegrated eventually in the early seventies following President Nixon's suspension of the gold convertibility in August 1971. The dollar was under severe pressure from increasing US budget and trade deficits. It was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The following decades saw trade forex develop into the biggest global market by far. In most countries controls on capital flows have been removed. The market forces enjoy more freedom to adjust foreign exchange rates according to their speculated values.

But the idea of fixed exchange rates did not perish by any means. In 1979, the EEC or the European Economic Community introduced the European Monetary System, a new system of fixed exchange rates. In 1992-93, this attempt too met with near extinction due to devaluations of a number of weak European currencies. However, the quest for currency stability continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

In recent years, commercial companies have faced much more mercurial currency environment then seen in the early history of trade forex. Financial institutions and investors have found a new area for play. The foreign exchange markets have developed as a giant in the investment market .An estimated more than USD 3,000 billion is traded every day, which is far more than the world's stock and bond markets combined.

I hope that the brief trade forex history outlined above will definitely develop a clear picture of the origin of forex trade.