Ancient
Currency trading and exchange first occurred in ancient times.[6]
Money-changing people, people helping others to change money and also
taking a commission or charging a fee were living in the times of the Talmudic writings (Biblical times). These people (sometimes called "kollybistẻs") used city-stalls, at feast times the temples Court of the Gentiles instead.[7] Money-changers were also in more recent ancient times silver-smiths and/or gold-smiths.[8]
Papyri PCZ I 59021 (c.259/8 BC), shows the occurrences of exchange of coinage within Ancient Egypt.[10]
Currency and exchange was also a vital and crucial element of trade
during the ancient world so that people could buy and sell items like
food, pottery and raw materials.[11]
If a Greek coin held more gold than an Egyptian coin due to its size or
content, then a merchant could barter fewer Greek gold coins for more
Egyptian ones, or for more material goods. This is why, at some point in
their history, most world currencies in circulation today had a value
fixed to a specific quantity of a recognized standard like silver and
gold.
Medieval and later
During the 15th century, the Medici family were required to open banks at foreign locations in order to exchange currencies to act on behalf of textile merchants.[12][13] To facilitate trade the bank created the nostro
(from Italian translated – "ours") account book which contained two
columned entries showing amounts of foreign and local currencies,
information pertaining to the keeping of an account with a foreign bank.[14][15][16][17] During the 17th (or 18th ) century, Amsterdam maintained an active forex market.[18] In 1704, foreign exchange took place between agents acting in the interests of the Kingdom of England and the County of Holland.[19]
Early modern
Alex. Brown & Sons traded foreign currencies exchange sometime about 1850 and was a leading participant in this within U.S.A.[20] During 1880, J.M. do Espírito Santo de Silva (Banco Espírito Santo) applied for and was given permission to begin to engage in a foreign exchange trading business.[21][22]
The year 1880 is considered by at least one source to be the
beginning of modern foreign exchange, significant for the fact of the
beginning of the gold standard during the year.[23]
Prior to the first world war, there was a much more limited control
of international trade. Motivated by the outset of war, countries
abandoned the gold standard monetary system.[24]
Modern to post-modern
From 1899 to 1913, holdings of countries' foreign exchange increased
at an annual rate of 10.8%, while holdings of gold increased at an
annual rate of 6.3% between 1903 and 1913.[25]
At the time of the closing of the year 1913, nearly half of the world's foreign exchange was conducted using the Pound sterling.[26]
The number of foreign banks operating within the boundaries of London
increased from 3 in 1860 to 71 in 1913. In 1902, there were altogether
two London foreign exchange brokers.[27] During the earliest years of the 20th century, trade was most active in Paris, New York and Berlin,
while Britain remained largely uninvolved in trade until 1914. Between
1919 and 1922, the employment of foreign exchange brokers within London
increased to 17, in 1924 there were 40 firms operating for the purposes
of exchange.[28]
During the 1920s, the Kleinwort
family were known to be the leaders of the foreign exchange market;
while Japheth, Montagu & Co., and Seligman still warrant recognition
as significant FX traders,[29]
while the occurrence of trade in London began to resemble the modern
manifestation. By 1928, forex trade was integral to the financial
functioning of the city. Continental exchange controls, plus other
factors, in Europe and Latin America, hampered any attempt at wholesale prosperity from trade for those of 1930s London.[30]
After WWII
After WWII, the Bretton Woods Accord was signed allowing currencies to fluctuate within a range of 1% to the currencies par.[31]
In Japan, the law was changed during 1954 by the Foreign Exchange Bank
Law. So, the Bank of Tokyo was to become, because of this, the centre of
foreign exchange by September of that year. Between 1954 and 1959
Japanese law was made to allow the inclusion of many more Occidental
currencies in Japanese forex.[32]
U.S. President Richard Nixon
is credited with ending the Bretton Woods Accord and fixed rates of
exchange, eventually bringing about a free-floating currency system.
After the ceasing of the enactment of the "Bretton Woods Accord" during
1971,[33] the Smithsonian Agreement
allowed trading to range to 2%. During 1961–62, the amount of foreign
operations by the U.S. Federal Reserve was relatively low.[34][35]
Those involved in controlling exchange rates found the boundaries of
the Agreement were not realistic and so ceased this in March 1973, when
sometime afterward none of the major currencies were maintained with a
capacity for conversion to gold, organizations relied instead on
reserves of currency.[36][37] From 1970 to 1973, the amount of trades occurring in the market increased three-fold.[38][39][40] At some time (according to Gandolfo
during February–March 1973) some of the markets' were "split", so a two
tier currency market was subsequently introduced, with dual currency
rates. This was abolished during March 1974.[41][42][43]
Reuters introduced computer monitors during June 1973, replacing the telephones and telex used previously for trading quotes.[44]
Markets close
Due to the ultimate ineffectiveness of the Bretton Woods Accord and
the European Joint Float the forex markets were forced to close sometime
during 1972 and March 1973.[45][46] The very largest of all purchases of dollars in the history of 1976 was when the West German
government achieved an almost 3 billion dollar acquisition (a figure
given as 2.75 billion in total by The Statesman: Volume 18 1974), this
event indicated the impossibility of the balancing of exchange
stabilities by the measures of control used at the time and the monetary
system and the foreign exchange markets in "West" Germany and other
countries within Europe closed for two weeks (during February and, or,
March 1973. Giersch, Paqué, & Schmieding state closed after purchase of "7.5 million Dmarks" Brawley
states "... Exchange markets had to be closed. When they re-opened ...
March 1 " that is a large purchase occurred after the close).[47][48][49][50]
After 1973
The year 1973 marks the point to which nation-state, banking trade
and controlled foreign exchange ended and complete floating, relatively
free conditions of a market characteristic of the situation in
contemporary times began (according to one source),[51]
although another states the first time a currency pair were given as an
option for U.S.A. traders to purchase was during 1982, with additional
currencies available by the next year.[52][53]
On 1 January 1981, as part of changes beginning during 1978, the People's Bank of China allowed certain domestic "enterprises" to participate in foreign exchange trading.[54][55]
Sometime during 1981, the South Korean government ended forex controls
and allowed free trade to occur for the first time. During 1988 the
countries government accepted the IMF quota for international trade.[56]
Intervention by European banks especially the Bundesbank influenced the forex market, on 27 February 1985 particularly.[57]
The greatest proportion of all trades world-wide during 1987 were
within the United Kingdom, slightly over one quarter, with the United
States being the nation with the second most places involved in trading.[58]
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