1.8 Forex Market History

Here’s some history to tell you how it came about that you can trade on the worlds largest market sitting in the comfort of your own home.

History of foreign currency exchange market.





Event / Development





The global chaos after World War II resulted in the establishment of The Bretton Woods Accord, intended to stabilize the global economy. The concept behind Bretton Woods System was to tie all currency exchange rates against gold.








On August 15th 1971 The United States declared the termination of the convertibility of the US dollar against gold i.e. the exchange rate of the dollar no longer tied to gold. This was the beginning of the end of the Bretton Woods System.  The Smithsonian Agreement is established. This widened the band within which currencies could be allowed to fluctuate. According to Smithsonian Agreement, the US dollar was pegged with the gold at $38 per ounce but with 2.25% trading bands. This made US dollar practically a flat currency and remaining G-10 nations agreed to base their exchange rates versus the dollar.





Europe tries to do away with its dependence on the U.S. Dollar by establishing The European Joint Float.





Failure of both the Smithsonian Agreement and European Joint Float, resulting in the official switch to a free-floating system.





Europe’s second attempt to cut loose form the dollar - the European Monetary System is introduced.





The International Monetary Fund gives its blessings to the free-floating system.





Failure of the European Monetary System – the path clears to a worldwide, free-floating system.





On-line currency trading is introduced by some banks.





New regulations put in place for securities derivatives, including currencies in futures or forwards, under the Commodity Modernization Act.





12 European nations adopt the Euro as their official currency on January 1.





The CFTC and NFA initiate the NFA Compliance Rule 2-43. The NFA mandates the minimum margins to be paid by retail FX customers.


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  • Forex Market History




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