A Look At The History Of Forex
After the financial crisis of the 1930’s, trade relations between two countries became difficult. The economic crisis that began in the us turned into a global financial crisis. So international trade came to a halt. The gold standart system that worked smoothly until the crisis period was abolished. During this period, London became the world’s largest financial center. Two fundamental agreements have been signed for the forex market to be in its current state.
Bretton Woods Conference
In 1994 the Bretton Wood conference was held in the United States, with 45 countries including the USA and the UK. With the Bretton Wood Conference, the following decisions have been made that form the basis of today’s forex market:
The IMF has become the control center that regulates the economic relations of the countries.
The US Dollar and the British sterling are designated as international reserve currencies.
It is accepted that all currencies are denominated in US dollars based on a certain gold quality of gold. 1 ounce gold was equal to 35 dollars.
Under this agreement, the value of the US dolar was reduced by 8 percent compared to foreign currencies. But in a short period of time it has become clear that the rate of devaluation in the US dollar is insufficient. On 12 February 1973, the US dollar was re-devalued by 10 percent. All these arrangements are the milestones of the flexible Exchange rate system which allows foreign Exchange rates to move freely. Nowadays country currencies can be bought and sold independently of other currencies. This affects the effectiveness and depth of the forex market positively. The basis of the market known as forex was laid in 1973. Today, the forex market is the world’s largest and most liquid market.