A Brief History of Forex or FX
The Breton Woods Agreement was initiated in 1944 in an effort to keep cash from draining out of war-ravaged
Europe. Currency values were pegged to the US dollar, which was then pegged to the price of gold.
The modern era of foreign exchange first emerged in 1971 with the collapse of the Bretton Woods Agreement. The US
dollar was no longer convertible into gold, signaling an increase in currency market volatility and trading
The collapse in 1973 of the subsequent Smithsonian and European Joint Float agreements signaled the true beginning
of the free-floating currency exchange system that drives the markets today. Starting in the 1980's, computer
technology extended the reach of the exchange marketplace.
Today, the values of the major world currencies are independent of each other, with intervention available to the
states only through the central banking system.
The foreign exchange (forex or FX) market exists wherever one currency is traded for another. It is the largest and
most liquid financial market in the world, and includes trading between large banks, central banks, currency
speculators, multinational corporations, governments, and other financial markets and institutions. The average daily
trade in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in
April 2007 by the Bank for International Settlement; it is more than three times the aggregate amount of the US
equity and treasury markets combined.
The forex market has no physical location and no central exchange. It operates through a global network of banks,
corporations and individuals trading one currency for another. The lack of a physical exchange enables the forex
market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.