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The
Forex Market and Global Expansion
The foreign market originated in 1973 and
more than three decades later, the forex market has been expanding
and developing into the robust worldwide market it is today.
Even so, currency or money has always been in our society,
in one form or another, since the ancient time of the Pharaohs.
The first currency dealers started in the Middle
East, where
these “moneychangers” exchanged coins from one country to another.
When paper bills were introduced as a transferable monetary
resource, the transactions became easier for all the traders.
The strengthening and development of economies were strongly
encouraged by forex and the international trading, bringing
many benefits to all the countries involved.
In order to establish the current forex market, several modifications
had to be made. The first of the major changes occurred towards
the end of World War II with the Bretton Woods Accord in 1944.
Three great countries, the United States, France and
Great Britain gathered together at the Bretton Woods to organize
a new worldwide economical order. This is when the U.S. dollar,
or USD, became the monetary standard form of currency that
dealers would use when determining the values of other currencies
on the forex market. Before the U.S. dollar became the standard
currency, the British pound was the main currency that was
used to compare other currencies on the forex market. During
this time, nearly half of Europe was in disarray while the
United States remained unharmed by WWII. In hopes to create
a more stable foreign exchange trading environment which would
help restore the worldwide economies and stabilize the international
economic state of affairs, the Bretton Woods Accord was established.
While the Bretton Woods Accord survived until 1971, a new
agreement soon followed in the December of that year, entitled
the Smithsonian Agreement. Although the Smithsonian Agreement
was quite similar to the Bretton Woods Accord, it also allowed
for additional fluctuation within the forum of the foreign
exchange market. As no new agreements were made, this was replace
with the current free floating system, allowing the governments
in forex trading to either peg or semi-peg their currencies
or allow the currencies to simply freely float. The free floating
system became officially mandated in 1978. Currently, all major
currencies move independently from the other currencies implementing
the services of forex dealers. Because there are no limitations
on currency dealers and investors who want to trade currencies
in an open and free foreign exchange market, there has been
an inflow of speculation by brokerage houses, independent broker
dealers, future trading brokers, hedge funds, banks as well
as individuals.
The forex market is driven by the enormous scope for profit
potential among the currency dealers, along with the supply
and demand. The free floating system is more practical for
today’s forex market which undergoes a change in the currency
rate approximately every 4.8 seconds. After loosely evolving
from a connection of financial centers to one integrated market,
the foreign exchange market is now playing an exceptional role
in a country’s economy. The forex market has expanded worldwide,
reflecting the constant growth of international trades. When
considering the size of the forex market, it’s important to
understand that any transactions made, whether it’s with a
future trading broker or an independent broker, will ultimately
lead to more transactions. This is mostly due to the brokerage
establishments as they readjust their positions whether to
manage or off set their risks.
Today’s foreign exchange market is a truly worldwide, 24 hour
a day trading zone, with most of the currency trading amidst
the currency dealers in London, New York and Japan. The only
time that currencies stop trading is on Friday when Japan closes
its business and then there is a one day window before Europe
steps in on Monday morning to open for business. Companies
that sell and buy foreign currencies as part of their business
like independent brokers and currency dealers, only make up
a small percentage of forex trading. The majority of forex
trading comes from banks, investment companies and brokerages.
As more currency traders discover the foreign exchange markets
potential for earning and raising capital, the market continues
to develop and grow steadily. Forex reaches a daily turnover
of at least 30 times more than any other U.S. market. # # # # # SolveYourProblem.com : 2007
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