History Of Currency Trading

The history of currency trading can be traced back to the ancient times. Earlier, trading of coins from different countries was done regularly by mere merchants. The first coins were come from ancient Egypt and paper notes followed in the regulation by the Babylonians. Forex trading history can be dated back to the middle ages where currency were traded through the international banks and this paved the way for the Europeans to spread currency trading throughout the Europe and the Middle East.

Read on this article further to know about forex trading history.

The creation of the Gold Standard Monetary System in 1875 marks the most essential events in the history of the currency trading. Before the gold standard, countries commonly use gold and silver as means of international payment. Gold standard was the fixed trading value. A certain weight of gold was the reference point of value for foreign currencies.

The basic idea behind the gold standard was that governments guaranteed the conversion of currency into a specific amount of gold, and vice versa. This means that a currency would be backed by gold. In the late 19th century, all of the major economic countries had defined an amount of currency to an ounce of gold.

Over time, the difference in price of an ounce of gold between two currencies became the exchange rate for those two currencies. This represented the first standardized means of currency exchange in history of forex trading. But during the World War I, the gold standard eventually broke down.

History of currency trading reveals that in the year 1944, the Bretton Woods Agreement found its way into the forex trading history. One of the important features of Bretton Woods is that the U.S. dollar replaced gold as the main standard of convertibility for the world’s currencies. Moreover, the US dollar then became the new standard of the financial market. This international financial framework leads the dollar to becoming the new global reserve currency.

This new settlement started the tracking and monitoring of currencies as well as the International Monetary Fund (IMF), and launched the World Bank. It aimed at setting up the international monetary stability by means of preventing monies from taking flight across nations, along with constraining speculation in the world currencies.

In 1971, when floating exchange rates began to materialize and the Bretton woods agreement was abandoned, the modern foreign currency exchange market was born. Since then, prices were floated everyday along with volumes, speed and price volatility. With advancing technology, cross-border capital movement picked up its pace.

The remarkable forex trading history depicts how this extended the market range all the way through Asian, European and American time zones. Currency trading rose dramatically from $70 billion a day in the 1980s and $1.5 trillion daily only 20 years later.