History of the Forex Market
The history of the Forex market began during the middle ages where currency was traded through the international banks. This helped the Europeans spread currency trading throughout Europe and the Middle East.
1875 marks the most essential event in the history of currency trading, when the Gold Standard Monetary System was created. Before that, countries commonly used gold and silver as means of international payment.
The Bretton Woods Agreement provided changes in exchange rates. In 1947 as the IMF began operating, the U.S. dollar served as the price of gold, fixed at $35 per ounce.
The U.S agreed to maintain that price for buying and selling gold. Eventually, the market economies of the world was set on dollar standard, The U.S dollar served as the world's principal currency.
However, the gold standard monetary system eventually broke down, during World War I.
The Bretton Woods Agreement has a great part in the history of currency trading. Signed in 1944, the agreement replaced gold as the main standard of convertibility with U.S. dollar. Furthermore, the U.S. dollar became the new standard of the financial market.
This is how the dollar became the new global reserve currency.
Bretton Woods Agreement set the creation of International Monetary Fund and the World Bank. The agreement aimed at setting up international monetary stability by preventing free exchange of money across nations.
In 1971 the Bretton Woods Agreement broke down and the modern foreign currency exchange was born.
From there began the history of Forex market, as we know it today. Currency trading rose from $70 billion a day in the 1980s to $1.5 trillion daily only 20 years later.