Forex History

Forex from a History Viewpoint

Forex does not appear by itself. There is even a history behind the emergence of this forex business. Why this forex trading business to be interesting. From the start of the meaning of the word to the basic things about forex. That this forex involves two or more countries, in fact all the countries of the world are related to forex, so there is a fundamental point of view that should be known as geopolitical, governance, community, macroeconomic, and behavioral factors of many market participants that are very different in purpose and approach.

The Bretton Woods deal

The first major transformation was the Bretton Woods deal that occurred towards the end of World War II. The United States, United Kingdom, and France meet at the United Nations Monetary and Financial Conference at Bretton Woods (Red Bretton Forest), NH to design a new global economic order.

This location was chosen because at that time, the U.S. is the only country that is not exposed to war. While most of the major European countries fall apart. In fact, World War II made the value of the US dollar soaring against other currencies that failed after the stock market crash of 1929. The US dollar became the benchmark currency comparison against most other international currencies.

The Bretton Woods Agreement was established to create a stable economic environment so that the global economy is expected to recover themselves. The agreement is also to establish or peg the value of the currency and the establishment of the International Monetary Fund (IMF) in the hope of stabilizing the global economic situation. Although the Bretton Woods Agreement lasted until 1971, it ultimately failed but succeeded in achieving its objectives under a charter of agreement that is rebuilding economic stability in Europe and Japan.

Initial Free Floating System

After the Bretton Woods Agreement failed, it continued into the Smithsonian Agreement in December 1971, which aims similarly but allows for a greater range of currency fluctuations. In 1972, the European community tried to stay away from its dependence on the dollar. Then came the European Joint Float Agreement agreed by West Germany, France, Italy, the Netherlands, Belgium and Luxembourg. Unfortunately, both deals (Smithsonian and Joint Float) made a mistake similar to the Bretton Woods Agreement and failed in 1973. This failure leads to a free-floating system.

Plaza Agreement

It does not take long for traders to realize that there is a potential profit in this forex trading world. Even with government intervention, there is still a strong level of fluctuation and fluctuations that make it a profit potential.

More than a decade after the collapse of Bretton Woods, the US economy is booming but the dollar is rising too far, too fast. The weight of the US dollar destroys third world countries due to debt and closes American factories because they can not compete with foreign competitors. In 1985, the G-5, the world’s most powerful economy – the US, Britain, France, West Germany, and Japan – sent representatives to a secret meeting at the Plaza Hotel in New York City.

News of the meeting leaked, forcing the G-5 to make a statement that encourages the appreciation of non-dollar currency. This is known as the “Plaza Agreement” and causes the dollar to fall significantly.

Euro Formation

After World War II, Europe made many deals designed to bring countries in the region closer together. Nothing is more productive than the 1992 agreement called the Maastricht Treaty, derived from the name of the city in the Netherlands where the conference was held. The agreement forms the European Union (EU), the creation of the euro currency, and incorporates the overall policy covering foreign monetary and security policies.

The agreement has been amended several times but the formation of the euro currency gives European banks and businesses profit by eliminating exchange risks in the global economy.

Online Trading

In the 1990s, the forex market grew more sophisticated and faster than ever. The function of money, how people perceive and use it, begins to change. Someone who sits alone at home can find an accurate price with a click of a button. Whereas a few years before, they needed a set of components such as traders, brokers, and telephones.

Currencies that were previously closed for trading because of a totalitarian political system, can now be traded. Emerging markets, like Southeast Asian countries, attract capital and currency speculation.

The history of the Forex market since 1944 presents a classic example of a free-market action. The power of competition has created a market with unparalleled liquidity. Spreads dropped significantly with increasing online competition among market players who can be trusted. Individual trading positions in large numbers now have access to the same electronic communication networks used by banks and international financial institutions.

And here we are, retail traders who are able to trade forex with limited capital using online trading platform.

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