Foreign Exchange Historical Perspective

Let's talk about the foreign exchange historical perspective. To give you an overlook...

The beginning of commerce among nations began thousands of years ago, when goods were traded for other goods. Soon there was the need to make the value of those goods more standard and less subjective.

Money started out of precious metals, like gold and silver. Soon paper notes were introduced with a face value equivalent to ounces of gold and/or silver.

All the way up to World War I, all bank notes were supported by their value in gold, but in practice it was very rare that the gold was claimed. This brought a false sense of a no real need to cover paper money with its equivalent in gold. As a consequence, there was a high supply of paper money leading to high inflation rates and political instability.

By the mid-1930s London became the leading center for foreign exchange and the British pound served as the currency to trade and to keep as a reserve currency. It had the nickname of “cable” because back then foreign exchange was traded on the telex machines, or cable, so it was an easy way to call it.

After the World War II, when the British economy was destroyed and the United States was the only country not that badly affected by war, the U.S. dollar became the prominent currency of the entire planet.

The Bretton Woods Accord helped to reinstate the gold standard until 1971, when former U.S. President Richard Nixon declared the suspension of the gold convertibility.

Today, currencies all over the world are generally quoted against the U.S. dollar, following the euro and the Japanese yen, in that order.

To continue learning about foreign exchange as a financial market, click on the link below.

Return from Foreign Exchange Historical Perspective to Foreign Exchange Financial Market.

And to skip it and go straight to get a deeper sense of what forex is all about, click on the link below.

Return from Foreign Exchange Historical Perspective to Foreign Exchange Center.

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