This article is an overview into the historical forex market evolution. It follows the forex market history and roots of the international currency trading from the days of the gold exchange, through the Bretton Woods Agreement, to its current setting. The Bretton Woods Agreement, established infixed national currencies against the dollar, and set the dollar at a rate of 35USD per ounce of gold. Ina Chicago bank refused to make a loan in pound sterling to a college professor by the name of Milton Friedman because he had intended to use the funds to short the British currency. This agreement aimed at establishing international monetary steadiness by preventing money from taking flight across countries, and curbing speculation in forex international currencies. Prior to Bretton Woods, the gold exchange standard - dominant between and World War I - ruled over the international economic system. Under the gold exchange, currencies experienced a new era of stability because they were supported by the price of gold. However, the gold exchange standard had a weakness of boom-bust patterns. As an economy strengthened, it would import a great deal until it ran down its gold reserves required to support its currency. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities would hit bottom, forex attractive to other nations, who would sprint into a buying fury that injected the economy with gold until it increased its money supply, driving down interest rates and restoring wealth into the economy. Such boom-bust patterns abounded throughout the gold standard until World War I temporarily discontinued trade flows and the free movement of gold. The Bretton Woods Agreement was founded after World War II, in order to stabilize and regulate the international Forex market. Participating countries agreed to try to maintain the value of their currency within a narrow margin against the dollar and an equivalent rate of gold as needed. The dollar gained a premium position as a reference currency, reflecting the shift in global economic dominance from Europe to the USA. The great volume forex international Forex trade led to massive movements of capital, which were generated by post-war construction during the s, and history movement destabilized the foreign exchange rates established in the Bretton Woods Agreement heralded the abandonment of the Bretton Woods in that the US dollar would no longer be exchangeable into gold. Prices were floated daily, with volumes, speed and history volatility all increasing throughout the s, and new financial instruments, market deregulation and trade liberalization emerged. The onset of computers and technology in the s accelerated the pace of extending the market continuum for cross-border capital movements through Asian, European and American time zones. Likewise, Euro markets are those where assets are deposited outside history currency of origin. That gave rise to a vast offshore pool of dollars outside the control of US authorities. The US government imposed laws to restrict dollar lending to foreigners. Euro forex were particularly attractive because they had far fewer regulations and offered higher yields. From the late s onwards, US companies began to borrow offshore, finding Euro markets an advantageous place for holding excess liquidity, providing short-term loans and financing imports and exports. London was and remains the principal offshore market. In the s, it became the key center in the Eurodollar market when History banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full risk disclaimer. We are no longer supporting IE6 as Microsoft has stopped development for this browser version. Download Internet Explorer 8 here for FREE. Or alternatively Download Google Chrome here for FREE.
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