Forex History Primer

Forex History Primer

Forex History 101

Although there is some debate about when foreign currency trading Forex officially began, the general consensus is that it began in the early 1900th During this period, London was the center of the forex trading world and therefore the pound became overpowering currency. Central banks use to keep the pound as a reserve currency.

Before personal computers and the Internet became prevalent, the only way banks can exchange currencies among themselves is through Telex Transfers (called cable transfers back in the day). That is why many traders still refer to as pound cable.

In 1944, the Bretton Woods agreement was signed to increase international monetary stability by preventing money from fleeing across nations, and restricting speculation in world currencies. Countries were prohibited from devaluing their currencies by more than 10%. In the early 1950's however, the expanding volume of international Forex trade caused rate setting under the Bretton Woods dramatically changed.

After the Second World War the European economies were severely depressed and the United States became a new world currency (because the U.S. was unaffected by the war). Even today, the most traded currency pairs against the U.S. Yet in recent months, the euro has become a serious candidate.

It was in 1971 that the Bretton Woods agreement was abandoned. The abandonment of this Agreement, the forces of supply and demand began to control the exchange rate.