The foreign exchange market is a significant phenomenon in the economic life of the world community. It is not surprising that it has its own history of origin and development. Moreover, the roots of the creation of the foreign exchange market go back to the middle of the 19th century, when in the capital of France, Paris, a unified system was adopted, called the “Gold Standard”.

According to the accepted standard, gold became the unit of international monetary settlements. The precious metal had to have a conversion corresponding to its quantity. Interstate exchange of national currencies was carried out in accordance with fixed rates, which were calculated in terms of the gold equivalent.

The introduction of the Gold Standard made it possible to significantly reduce the level of inflation and control the emission of funds that was not backed up by a gold reserve. Gold was not chosen as a single currency by chance – this was due to its high value, the possibility of unmistakable definition, and divisibility. Over time, gold was replaced by its paper equivalent – certificates.

The gold standard underwent significant changes during the First World War when the countries involved in it were forced to spend huge injections of funds to cover military expenses. This led to a decline in the gold reserves of the belligerent powers. Thus, the Gold Standard had to be abandoned.

After the global crisis significantly weakened the economies of leading countries in the 30s of the twentieth century, a period of recovery and development began. But the Second World War, which began soon after, stopped and reversed this process. Only in 1944 was the Bretton Woods Conference held in the United States of America, which put an end to the constant economic rivalry between the two powers – Great Britain and the United States. At this conference, the main theses were adopted, which laid the foundation for an absolutely new system of organizing trade settlements.

Also, the Bretton Woods Conference consolidated the following provisions in the global economy:

  • The US dollar became the main currency for international settlements;
  • The national currencies of the countries participating in the conference were linked to the US dollar;
  • The main currency, the US dollar, was tied to gold;
  • The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), known to this day, were founded and began their activities.

Upon the entry into force of the provisions of the Bretton Woods Conference, the British pound sterling, which had dominated until then, was forced to give way to the American dollar as the main currency. Such a fact as the binding of international economic relations to a single currency, which itself was prone to constant depreciation, led to very frequent crisis phenomena in the world economy. It became obvious that it was necessary to abandon the fixed pegging of the rates of national currencies to the US dollar. And in the early spring of 1973, at the next International Conference in Jamaica, it was officially announced that the fixed pegging of exchange rates to the US dollar was canceled, but there was no ready-made new decision at that time. Only three years later, again in Jamaica, significant amendments were made to the IMF Charter and a new economic model was defined, which became the prototype of the foreign exchange market. The main changes concerned the abolition of the mandatory fixed exchange rate, the concepts of floating and fixed rates were introduced; fluctuations in the rates of national currencies became free and depended on natural factors; in most countries, currency restrictions were lifted; gradual transition from cash payments to electronic transfers and so on.

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FX Market history in Russia

As the foreign exchange market developed, competent specialists began to appear who closely monitor the slightest fluctuations in national currencies, the dynamics of their growth (or decline). These observations make it possible to almost accurately determine the best moment to sell (buy) a certain currency and, accordingly, endow all participants in the world market with equal rights and opportunities to make a profit. In addition, the foreign exchange market made currency a commodity, which made it possible to display the real value of national assets as accurately as possible. For example, with the growth of the economy, the exchange rate of the national currency also grows proportionally, and with regression, its fall is observed.

The emergence of the foreign exchange market in Russia dates back to the early 90s of the twentieth century. With the development of free economic relations, the most far-sighted banks quickly realized the benefits of working in the market, more precisely, in receiving huge incomes just by carefully studying the dynamics of the foreign exchange market. And every year the number of people who want to get rich quickly in the market only increases.

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