The history of foreign exchange ( Forex )

On Friday, October 21, 2011 0 comments
Since time immemorial, humans have been trading with the surroundings for various reasons by way of barter system. Along with age and civilization perkembangnya barter system this fall because it has many flaws that are found the system - a new payment system until the end by using money as a medium of exchange and payment. Payment system by using the money also has a weakness to trade with a country that has a different type of currency. The need arises because the exchange rate of the currency of a country is usually not accepted as a medium or a medium of exchange in another country. International trade relations gave rise to the demand and supply on several currencies. This then led to the development on the stock exchange foreign currency, so that the regulator needed for millions of demand and supply transactions that occur every day, which led to the determinants of foreign currency exchange rates.

Forex trading has been around since the invention of currency conversion techniques a country to other country's currency. But institutionally there is a new Forex Trading after the establishment of Arbitration Futures or Futures Contract. For example IMM or International Money Market, founded in 1972 as a division or part of the CME Chicago Mercantile Exchange (perishable commodities). Or another example LIFFE or the London International Financial Futures Exchange, TIFFE or Tokyo International Financial Futures Exchange and others. Forex history itself has already begun a very long time. Forex transactions stems from trading commodities, like gold, rice, and others. Changes in the pattern of the Forex market itself felt until now at least four times a developmental experience. First, in the era of the Gold Standard period 1880-1914, the second, Period Period of World War I in the era of 1919-1939, the third period on the Bretton Woods era of 1946-1971 and the fourth on a Floating Exchange Rate Period 1971 to the present era.

That change can be summarized into two stages, namely stages Period Exchange Rates Fixed and Floating Exchange Rate Period. The Gold Standard Period Period Period Period of World War I and Bretton Woods is included stage Fixed Rate Period. In the post-Bretton Woods era of the failure of the Fixed Rate Period in maintaining economic stability, foreign exchange transactions began to be part of the most important development of the world until now. The reason is because an exchange rate between countries left entirely to market mechanisms. The market will determine whether the how much the exchange rate is associated with the development of a country's economy.

The history of the exchange / currency trading can be said as old as money itself and the new received considerable attention by many countries in the last decade. If the gold standard of review in the decade (1880 - the outbreak of World War I), at which time the money is guaranteed by the pure gold which is the standard of the country. Balance of payments deficit will be closed with the transfer of gold, to result in money supply decreases and prices rise as overseas, so this will increase exports to the deficit disappear, and vice versa. Thus, a relatively stable currency values. Until World War I, the gold standard that enables the achievement of high levels of correction to the balance of payments. But not so in time of war, most likely due to the growth of trade unions and large corporations, a guaranteed wage and price so it is not easy to reduce this tendency, reduced-impact jobs. Because of swelling unemployment in the early 1930s, the gold standard is not used anymore. After the war finished and the world economic depression in 1930 - an, the world wants a better economic stability. So On July 22, 1944, on the initiative of the United States, held a conference of the International Monetary known as: "The Bretton Woods Conference", which was attended by 44 countries. The proposal submitted by the delegation of the United States (White Plan) prepare basic plans are approved.

At the conference, created a fixed currency exchange system called the "Fixed Exchange Rate System", which has some similarities with the gold standard, which includes the following provisions:

1. Each country set its exchange rate against the USD;
2. America set a value of USD against gold (USD 35/ounce);
3. America will sell gold at fixed prices to the official holders of the USD;
4. Changes in currency exchange rates against USD morbidly exceed 1%, if forced to be up to max 10%.

Since then the country - a country in the world and America began to grow rapidly and two years after the conference, founded the international monetary institutions and the World Bank that we know today by the IMF (International Monetary Fund) and the Word Bank, to oversee the system.

Then a change happened in America, the period of the 1960s, the U.S. balance of payments deficit to force the country off its gold reserves amounted to USD 18 billion for France to exchange USD her with gold and continue in the period in the 1970's, America must again release the reserve gold amounting to USD 11 billion. The poor American economy at that time led the world community is less confidence in the USD. And in a country that has a strong currency because it has enough gold reserves, such as Switzerland and Germany, they exchange USD him with their currency is CHF and MDK. This leads to short-term debt that matures in America nearly reached nearly twice its gold reserves. Bretton Woods system is only able to survive almost 30 years, on August 15, 1971, President Nixon announced a change in exchange rate system to allow its exchange rate to USD with floating (Floating Exchange Rate System), it is reiterated in a conference in Washington on 17 -18 December 1971 (Smithsonian CONFERENCE), hence the birth of a floating exchange rate and is valid up to now.


After President Nixon set the float value for the USD, many countries decided to float its exchange rate, such as: German, English, Dutch, Japanese and even years - later years many countries in the world to let the value of money floating in accordance with market mechanisms, namely power demand and supply.

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