Forex is an abbreviation of the English foreign exchange ("foreign exchange"). In the global forex market, there is an interbank exchange of currencies at free prices. In a narrower sense, forex is a platform for speculative currency trading through market brokers and dealing centers.
History of Forex
The emergence of Forex was preceded by a number of historical events. The impetus for the formation and free existence of the global market came during the years of Richard Nixon. Under the 37th President of the United States, the gold standard was abolished.
August 15, 1971, under the Smithsonian Agreement, the dollar ceased to be freely convertible into gold. As a result, the exchange rates of all currencies lost their stability and speculations focused on market demand became possible. To legitimize exchange operations, Forex was created with the possibility of quotes fluctuations up to 4.5% for pairs with the dollar and up to 9% without it. The demand for the currency was almost completely dependent on the economic indicators of the states - stable growth ensured the high quotation of national currencies.
In 1975, German Chancellor Helmut Schmidt and French President Valéry Giscard d'Estaing improved the new system. On their initiative, the heads of economically developed countries began to gather at summits to discuss a number of problems. So, at a meeting in Rambouillet (France), an international system of currencies was developed. According to the new rule, the exchange of currencies should be regulated by the foreign exchange market or forex. The final transition to the modern monetary system took shape in early 1976 in Jamaica. From now on, exchange rates are set not by the state, but by demand, which means the liberalization of the foreign exchange market. The European Monetary System, created in 1979, established a monetary standard, according to which banks must maintain the exchange rate of the national currency within ± 2.5% of the central rate.
In 1985, representatives from France, Germany, Japan, Britain and the United States met in New York to work out an agreement that would change the world economy. Central banks now have the ability to regulate exchange rates. This change is aimed at preventing destabilization in the global market.
Significant expansion of forex began in 1990. New technologies have made possible the free flow of capital between countries. The market became available to individual traders and investors who received a tool for speculating in currencies. Since 1995, traders have been trading currencies over the Internet in real time.
Interesting facts
- People have been exchanging money since biblical times, but the world's first bank Monte Dei Paschi di Siena appeared in Tuscany (Italy) in 1472. In the 15th century, the Medici (Mèdici) opened banks abroad to facilitate textile trading.
- American bank Alex. Brown & Sons was already trading in foreign currencies in 1850, but the year 1880 is considered to be the beginning of foreign exchange trading. At this time, the gold standard was introduced.
- The most popular currency in the world is the US dollar, accounting for 59% of all transactions (as of the end of 2020).
Forex earnings are real, if you do not plan to become a millionaire within a year. Study, master financial skills and the ability to self-control, plan your actions, and you will definitely achieve your goals.
