Forex Trading: A Brief History   by Paul Jei

in Finance    (submitted 2011-02-28)

Relatively new on the world market, in regards for trading by individuals, the forex market, or currency trading, was relegated to international companies with business in numerous foreign countries. The highly speculative trading was not the popular form of investment that it is today. By most accounts, the trading of currency got its genesis after World War II. In the wake of the great war, many European countries were economically decimated. The United States enacted the Bretton Wood Accord. There were several aspects of the world economy addressed, but the most critical was the pegging of foreign currencies to the U.S. dollar, which was connected to the price of gold; the gold standard.

Problems

Essentially, by linking these foreign currencies to the dollar, the dependent currencies waxed and waned with the value of the U.S. dollar. Countries with the dependent currency began to grumble immediately about the inability to manage the value of their own currency. And many in the U.S. complained that by linking the U.S. currency to gold, it pushed the value of the dollar upward, thereby causing the high inflation that the U.S. experienced in the early 70’s. Finally, with the demand for gold, the oil crisis, increasing inflation, President Nixon pulled the plug on the gold standard and valued the U.S. dollar to 1/35th of an ounce of gold. This was the end of the Bretton Wood Accord and gave us the “stand on their own” currencies, based solely on economies and other market conditions.

Beginning of Forex Trading

Soon after, The Chicago Mercantile Exchange (CME)became the first exchange to offer currency trading. And much like everything else, much of the forex trading has moved to the web. On the internet, many forex brokers are available for advice, and consultation. Since it is always an exchange of one currency for another, the fx brokers give a two-way quote for each currency pair. This can be a very fast changing “game” and complicated, in the way currency reacts instantly to world events. Don’t go into this speculative form of investing with blinders on.

About the Author

Paul is a financial writer and journalist. He recommends anyone looking to start online forex trading please do your research and make informed decisions.