FOREX History

We go back to 1944. In this year, took place the Bretton Woods agreement, which aimed to provide the nations of monetary stability that would prevent the flight of capital between countries and currency speculation.

Previously, the value of the coins was established as the gold reserves of each country. This was a very unstable system because it provoked cycles of growth and recession exaggeratedly accented.

When a nation developed, he bought importing goods, and therefore lost some of its gold reserves, support of the coins that were paid. Therefore, the money supply was reduced and the rising price of money (interest rates), causing a decrease in economic activity up to the recession. Falling domestic demand for products, they lowered their price, returning to be competitive internationally, and being exported to other countries. It then went into a pattern of accelerated economic growth, which the monetary mass and therefore gold reserves grew back.

It was necessary to find a system that banish these economic models with cycles of growth and recession so sudden and brief. In short, it was to achieve greater monetary stability that would turn sustainability of economic growth and a softening of cycles of growth and decline.

The Bretton Woods agreement


To this end it was agreed Bretton Woods, in which an exchange rate of all currencies against the dollar, and the dollar in turn was fixed to gold ($ 35 per ounce of gold). Governments pledged to keep their currencies within a narrow range of variation against the dollar. In addition, it prohibited the central banks of each country arbitrary devaluation of its currency to achieve price competitiveness and increase exports (the maximum tolerable devaluation would be 10%).

But these conditions were not met, since the 50s, the massive reconstruction activity after the Second World War and the need for goods and services a population with significant deficiencies, made a huge flow of capital to be given to international level that destabilized the exchange rates agreed at Bretton Woods. Finally, in 1971 the Convention was abandoned because it is impossible to comply (you could handle the change 35 $ an ounce of gold). The currencies began to fluctuate freely then, based on the laws of supply and demand, calculating daily exchange rates. It increased notably the volume of capital in circulation as well as the speed and volatility of foreign exchange transactions halved.

From the 80s, the introduction of new technologies began to promote the globalization of market currency exchange, and be uninterrupted, passing the market from Asia to America and Europe uses times continuously, which caused a market open 24 hours.

And with the technologies of the 90s and the emergence and spread of the Internet around the world in the new century, the market currency exchange became global, continuous and accessible to all investors, becoming the largest market by volume daily capital involved. And this global market for buying and selling currencies is what is known as FOREX (Foreing Exchange Market Currencies), or international foreign exchange market.