The forex has not always been like it is today. The market in which traders exchange currency pairs is the result of many developments and major changes that we will discuss today, in a few dates.
1944 : Bretton Woods agreement
In July 1944, the u.s. dollar becomes the base currency of the monetary exchange. In other words, the world’s currencies are now no longer indexed on the gold but traded against the dollar. The u.s. currency remains, however, convertible into gold and the fixed rate is set at 35 dollars per ounce. The Bretton Woods institutions will be 25 years. They will come to an end because of the currency instability caused by the rebuilding after the war.
1969 : Introduction of the Special Drawing Rights (SDRS)
The SDR consists of a basket of currencies of major widely used for international trade and the financial markets. Currently it is composed of the u.s. dollar, the euro, the japanese yen and the british pound. It is a monetary tool international effort to supplement the existing official reserves of member countries.
1971 : Beginning of the end of the Bretton Woods agreements
Mired by deficits in domestic, the United States abandoned in 71 the convertibility of the US dollar into gold. The decline of the us dollar USD so starts. In 1973, the Bretton Woods agreements come to an end permanently.
The year 1971 marks the official birth of the forex market is a foreign exchange floating for organizing a market of debit/credit between the currencies of the major industrialized nations and that, according to supply and demand.
1972 : introduction of the european monetary snake
The european currency “snake” is a device that is economic to limit the fluctuations of exchange rates between the member countries of the EEC. With this system, no currency was allowed to fluctuate upward or downward beyond 2.25%. He was replaced in 1979 by the european monetary system, EMS.
1992 : Disappearance of the EMS
The european monetary system broke out in 1992 was attacked by the speculation. The pound, the lira, the peseta, the escudo and the punt (the irish pay the price.
1994-2001 : the crisis of the ” small “currencies
In 1994, the mexican peso experienced a major crisis. In 1997, the bath thai suffered the same fate. In 1998, the deficits russians lead an attack on the ruble. In 2001 it was Argentina that is beginning to show worrying signs.
2007 : subprime crisis
While the United States sell for many years of the structured products on the basis of mortgage debt, the system finds its limits. A real estate bubble bursts then in 2006, leading to a multiplication of bankruptcies and a devaluation of the portfolios, overvalued of the major institutions of the world. In 2008, Lehman Brother, a major bank in the country, declared itself bankrupt, then follows a general panic, which gradually expanded to the entire planet.
2014 : Implementation of the european plan for the protection of the banking system
In order to avoid the difficulties encountered by Lehman Brother and guard against a possible collapse of the banking system, the european authorities and the member countries of the euro area to put in place the european level of protection of the banking system.
2020 : progressive End of the euro ?
The exit of Britain from the european Union will weaken the single currency and the latter could continue to live the dark hours if France puts into power a candidate eurosceptic (like Marine Le Pen) who wish to regain national independence. In the end, it is the EU that should be destabilised and the euro may not survive.