The word forex stands for foreign exchange. The foreign exchange (forex) market is a global market where one can buy and sell any of the currencies of all countries in the world. In this post, we will be examining the history of forex trading.
It is also referred to as the currency market. You carry out foreign exchange anytime you trade your home currency for foreign currency or any currency for another.
The forex market was opened during the 70s with the establishment of free exchange rates. Since that time, the people and businesses who have participated in the forex market have always determined what price one currency will have counter to another currency based on the law of supply and demand.
The forex market is undisputedly the largest financial market in the world, with a daily trading volume in excess of USD4 trillion in 2010 as determined by the authoritative source on global forex market activity – the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, published by the Bank for International Settlements (BIS). In 2016, a survey published by the BIS puts the daily trading volume at about USD5.4 trillion. This shows that the forex market continues to grow.
History of Forex Trading
Forex trading started during the time of the Babylonians. This system was designed for currencies and exchanges. In the early times, the goods are being traded for another tangible item. When the metal age began, gold and silver became the tool of transaction. This idea became popular during that age.
Notable occurrences in the developmental timeline of the forex market include:
- In 1944, the Bretton Woods Accord was formed which allowed currencies to fluctuate within 1% of range to currency par.
- The US dollar becomes the global reserve currency and the price of gold is set at $35 per ounce.
- In 1971, US President Richard Nixon ends Bretton Woods Accord. The currency system becomes free-floating.
- 1973 – Reuters replaces telephone and telex with computer monitors for quotes. Smithsonian Agreement allows currencies to trade within 2 % range.
- 1981 – People’s Republic of China allows some to participate in forex trading.
- 1990s – Banks create their own trading platforms. Trading is done majorly by institutional investors.
- Today – Retail forex brokers make internet-based trading platforms for individual traders, allowing access for all.
The forex market has really come a long way when talking about development to become the largest financial market in the world. We can all take a cue from this and always keep growing to become better versions of ourselves.
Bye and see you in the next one!
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