The History and Origins of Forex Trading
July 13, 2016
The market is currently thriving, capable of attracting new investors at a steady pace. However, Forex Trading has a troubled history behind it. Before definitively exploding and becoming the meeting place for thousands upon thousands of traders, it had to face crises and monetary policies that were not exactly favorable. There are three dates to consider: 1944, 1971, and 1991.
1944: Forex Trading and the Bretton Woods Agreements
People have always exchanged one currency for another. It is an activity, in fact, necessary for trade and the maintenance of relations - not just commercial - between different countries. However, from a speculative point of view, the exchange between currencies has assumed a significant role since the nineteenth century, when exchange rates were subject to intermediation with gold. In practice, the difference between the values of currencies corresponded to the difference in their value in gold.
From this point of view, 1944 is an important date as it added another reference point: the dollar. In that year, the Bretton Woods agreements were stipulated, which anchored gold at 35 dollars per ounce. The speculative dimension, however, was hampered by two elements: the tendency for fixed exchange rates and, precisely, the stability of the dollar-gold relationship.
1971: Forex Trading and the End of Bretton Woods
Bretton Woods entered into crisis a few decades after its stipulation due to difficulties on the energy front. The date of 1971 is also important because states began to allow exchange rate variability. This change opened the doors to speculation, elevating the exchange between currencies to a mere speculative activity. In practice, Forex Trading was born as it is understood today.
1992: Forex Trading and the Advent of the Internet
Perhaps the most important date, albeit symbolic, is 1991, the year of the birth of the internet. The change was quite gradual, but the advent of the World Wide Web brought with it some dynamics that favored the worldwide (and capillary) spread of Forex. In particular, the network has allowed opening the doors of Forex to ordinary people, assisted by brokers who, precisely, offer online trading services. It is no coincidence that today Forex is practiced almost exclusively online.
