Before anyone considered to call it “Foreign Exchange, " currency trading existed. In fact, it dates back to the Middle East and Middle Ages, when international merchants came up with international bills of exchange for use in speeding up trades between nations. These bills, coins or notes were used to make third-party payments, and gave the merchants the flexibility they needed in order to grow their foreign dealings.
The modern forex market is a product of the twentieth century. That century saw wild swings, from wild volatility in currency values, to long periods of stability, to a combination where some currencies were moving by huge amounts daily, and some were saying in a very tight ranges. London became the center for forex in the time between World War I and World War II, and the market was based on the Great British Pound (GBP. ) Also at that time, the Bank for International Settlements was founded in Switzerland.
This bank was created to oversee the economies and finances of the newly established countries created by the treaties of World War I in Europe. It also helped provide cash and financing to countries who were having trouble recovering from the war. After World War II, the British economy was in tatters, and the United States picked up the mantle. Since the late 1940s, the US Dollar (USD) has been the international currency of exchange.
While forex seems new to many people, it truly is an old market, and one that has help shape the world as we know it.
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