A Brief History of Forex

Filed under: Learn Forex Trading |

Screen shot 2013-06-08 at 10.09.47You might think of the foreign exchange market (or ‘forex’ for short) as a distinctly modern day phenomenon – a market that trades an incredible $4 trillion in currencies every single day. But the forex market in fact goes way back to biblical times, when money changing people would help people to change money in exchange for a commission or fee. Later, around the fourth century the Byzantium government in Ancient Greece held a monopoly on the exchange of currencies.

 

The exchange of currencies in the ancient and later in the medieval world was all about the facilitation of trade with foreign nations. Prior to this, trade was done through the exchange of one item for another – however, forex made it possible to purchase goods from a foreign nation without the exchange of goods.

 

In the medieval world, the Medici family opened banks in foreign locations in order to exchange currencies for textile merchants. Moreover later, an active forex market developed in Amsterdam. However, the modern forex exchange market can be traced back to the late nineteenth century, when the gold standard came into use. After this, governments around the world began to hold foreign exchange currencies, and gold for trading. After World War II, fixed rates of currencies based upon the gold standard began to be abolished, beginning with currencies being allowed to fluctuate in a 1% range, and eventually, by the 1970s, a free-floating currency system was introduced, which is the market, as we know it today; with 1973 being the date when all of this was set (and if you look at forex exchange historical data in MT4, this is the date that often marks the beginning of the data set). So, although forex exchange has a long history, the market, as we know it today, can be said to have begun in 1973, with advances in computer technology now making it increasingly accessible to more and more people.

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