History of the Forex

Before World War II, there was no international institution to coordinate the different monetary systems. So, there was no listing for the exchange rates as there is today.

In 1944, with the Bretton Woods agreements, the 44 countries of the UNO founded the IMF and the IBRD in order to assure the « stability » of the international monetary system.

The currencies of these countries must be defined according to the fixed parity chocked on the US dollar. The dollar is chocked on a fixed gold parity ($35 to the gold ounce).

As the parities are fixed, it is impossible to speculate on the currencies.

In 1971, Nixon suspended the convertibility of the dollar into gold; all the currencies are now floating.

Today, the Forex, it is a money market (over the counter) opened 24h/24 with about $3200 billion each day (in 2004). The parities more dealt are the eur/usd (about 28% of the total volume), the usd/jpy (about 17% of the total volume), and the gbp/usd (about 14% of the total volume).

The exchange market: which is also the more important liquidity of the financial market, and a low volatility (on the contrary of what a lot of people think, in fact, the eur/usd fluctuates of more or less 1% a day).

The main actors on the exchange market are: the central banks, the commercial banks, and the hedge funds.