Forex or foreign exchange market is the largest financial market in the world. It is a decentralized market where currencies are traded. Forex trading involves buying and selling currencies with the aim of making a profit. The forex market is open 24 hours a day, five days a week, and is accessible from anywhere in the world. But when did forex come out?
The history of forex can be traced back to ancient times when traders exchanged goods and services across borders. However, the modern forex market as we know it today, emerged in the 1970s. Prior to that, the Bretton Woods Agreement, signed in 1944, established a fixed exchange rate system, where the value of the US dollar was tied to the price of gold, and other currencies were pegged to the dollar.
The Bretton Woods Agreement worked well for a few decades, but the system gradually began to break down due to various economic and political factors. In the 1960s, the US government embarked on a spending spree to fund the Vietnam War and social welfare programs. The increased spending led to inflation, which reduced the value of the dollar.
As the value of the dollar declined, other countries began to lose faith in the Bretton Woods system and started to convert their dollars into gold. This put pressure on the US government to maintain the value of the dollar, which was becoming increasingly difficult.
In 1971, US President Richard Nixon announced that the US would no longer convert dollars into gold, effectively ending the Bretton Woods system. This led to a free-floating exchange rate system where currencies were allowed to fluctuate based on supply and demand.
The end of the Bretton Woods system paved the way for the modern forex market. In the early days, forex trading was restricted to banks and large financial institutions. However, with the advent of computer technology, forex trading became more accessible to retail traders.
In the 1980s, the first online trading platforms were created, which allowed traders to buy and sell currencies from their computers. This made forex trading more convenient and reduced transaction costs.
The popularity of forex trading continued to grow in the 1990s and 2000s. The availability of high-speed internet and the proliferation of mobile devices made it possible for traders to access the forex market from anywhere in the world.
Today, the forex market is the largest financial market in the world, with a daily trading volume of over $5 trillion. It is a global market that operates 24 hours a day, five days a week, and is accessible to anyone with an internet connection.
In conclusion, the modern forex market emerged in the 1970s after the collapse of the Bretton Woods system. The availability of computer technology and the internet made forex trading more accessible to retail traders, which led to the growth of the market. Today, the forex market is the largest financial market in the world, and its popularity continues to grow.
