Forex trading is said to have a history that goes back to the times when the currencies were of silver and gold. The Greeks and Egyptians traded the goods and coins according to their weights and size. Later during the Roman empire, the currency was centralized under a government-run monopoly, and since then the currency trading has always existed according to the monetary policies of central banks. Forex trading has become one of the biggest, most liquid and accessible trading markets in the world. Let us look at the history of forex to understand the historical events which are responsible for shaping this market.
During 6000BC, when the currencies were not introduced, people use to trade goods for other goods. The process is known as the barter system. The system started evolving when one type of goods, such as salt and spices, became a popular medium of exchange. They became the first medium of foreign exchange as the spices were shipped to diffenet regions for trade.
Introduction of currency
In the 6th century BC, first gold coins were produced as a new medium of exchange. Ships would now sail to trade goods in exchange for a uniformed, portable and durable mode of value. The coins were easily divisible and acceptable for any kind of goods. The only drawback was the weight and limited availability. Later in the 1800s, the gold was made into a standard, and the government would redeem an amount of paper for the value of gold. But it only lasted till World War I when Europen countries had to suspend the gold standard so that they could print more money for the war. This destroyed the gold standard, and many countries faced a recession during the years of war.
The Bretton Woods System
After the first and second world war ended, the US, Great Britain, and France met at the United Nations Monetary and Financial Conference. The aim of this conference was to design a new global economic order. The Bretton Woods Conference compared the currencies of several countries so that the currencies can be adjusted in accordance with each other for fair trade purpose. The US dollar was in accordance with gold as it has the most gold reserve in the world at that time, and the other countries had to transact in the US Dollar.
In the 1990s, the currency markets to another lead with the introduction if the internet. The currency markets started growing much faster as compared to past trading and forex became accessible to people while sitting back at their home. Now trading became much easier and did not require any traders, brokers, or telephones. These advances in communication gave way to capitalism and globalization and individuals today have access to all the electronic communications networks used by banks and professional traders.