History of the Forex Market
Posted: Dec 20, 2020
The history of the Forex market is marked by two special events which left a deep impression on its formation and development. These two events are the historic Gold Standard System and the Bretton Woods System.
Gold Standard and Bretton Woods Systems
The main idea behind the Gold Standard system formed in 1875 was to guarantee governments that a currency would be supported by gold. All major economic countries became currency exchange rates for these as defined in the amount of currency for an ounce of gold as defined in the terms of gold and the value of their currencies in proportion to these amounts. It marked the first standardized means of currency exchange in history. However, The Gold Standard System of World War I caused a breakdown of countries' economic policies, which would not be constrained by the stable exchange rate system of the gold standard as demanded.
In July 1944 more than 700 delegates from allied nations brought forward the importance of a monetary system which would fill the gap left behind the gold standard. They arranged a meeting in Bretton Woods, New Hampshire, to establish a system that would be called the Bretton Woods System of International Currency Management. The creation of the Bretton Woods system led to the formation of stable exchange rates as the United States pegged its currencies to the dollar equivalent to $35 for an ounce of gold and defined in the value of the U.S. dollar in terms of other countries. The main reserve currency of the U.S. dollar and the only currency that received support from gold. However, in 1970 the U.S. gold reserves ended so that it was impossible for the U.S. fund to cover all foreign reserves held by central banks.
In August 1971 the U.S. announced that it would be that the U.S. dollar was in the Foreign Central Banks Reserve. No longer was the end of the forex Bretton woods system and the beginning of the forex trading system.
Forex Market Trading Session
The currency exchange market never sleeps, and quotes constantly change. The only market is open around the clock five days a week. Forex market depends on broker reviews. Large amounts of currencies are traded on the international interbank market in Zurich, Hong Kong, New York, Tokyo, Frankfurt, London, Sydney, Paris and other global financial centers. This means that the interbank market is always open - when working day ends in one part of the world, banks in the other hemisphere have already opened their doors and business is going on.
No time limit - a very important condition for traders with a busy work schedule. They need not worry about the opening and closing hours of trading sessions on the interbank market and they are free to ever arrange their trading, as it does not matter to forex traders which bank provides liquidity for their transactions.
But forex market liquidity can change during the day, depending on which time zone banks are currently operating (when liquidity falls, spreads and the pace of price changes slows). For example, Japanese banks paired with Japanese yen will be most liquid during working time.
Below you can find the opening and closing hours of trading sessions on the interbank market (i.e. high liquidity period), which are determined by the early hours of the largest banks of each time zone.
Forex Market Participants
The foreign exchange market is made up of different participants, also called forex market players, who trade on the market for quite different reasons. This means that participating transactions in the foreign exchange market simply do not take place for speculative purpose. Forex Brokers Comparison or Comparación de Brókers de Forex relies on its participants. Each of the participants plays its part in the post-market providing perfection and stability.
The main players of the market are:
Governments and Central Banks
Commercial Banks and Companies
Retail Forex Traders
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