The origin of the currency market

 The origins of the forex market go back to long periods of time and can be traced back to the Middle Ages which saw the beginning of the exchange markets with the invention of the banking traders the idea of ​​stock exchanges. The outsourcing of third parties has allowed for more flexibility and thus transactions in the trading markets have seen an exponential growth.

The modern forex market has seen periods of high volatility which are followed by other periods of relative stability. In the mid-1930s, London became the main center for foreign exchange trading, while the pound sterling played the role of the standard currency in circulation, as well as the primary reserve currency.

After the end of World War II and the devastation of the British economy in its aftermath, the United States was the only superpower that emerged from the war without catastrophic effects, which opened the way for the US dollar to rob the role of the pound sterling as the reserve currency in many countries. This role was reinforced after the US dollar was pegged to gold at $35 an ounce, which made it the global reserve currency to this day.

The era of free currency trading began at the end of the seventies. Such a transformation was a milestone in the history of global markets during the twentieth century, and one of its fruits was the formation of the forex market in its contemporary sense. Since then, anyone can trade any currency, the value of which is determined as a function of current market demand and supply factors and without the need for government intervention. The foreign exchange markets have witnessed an exponential growth in trading volumes since the floating of currencies and the introduction of the free exchange rate system. Trading volumes in 1977 amounted to about $5 billion, then increased to $600 billion in 1987, and reached the trillion-dollar barrier in September 1992, then settled around $5 trillion in 2010.

In this article, we briefly review the main factors that led to this massive growth in currency trading volumes. The main credit is due to the increase in fluctuations in exchange rates, with the increasing reciprocal influence of different economies on the interest rates set by central banks, which greatly affect the value of currencies, as well as the intensification of competition in commodity markets, and at the same time the emergence of multinational companies that It operates in different countries, and finally the technological revolution that occurred in the field of currency trading. The last factor was manifested in the development of automated trading systems and the transition to online currency trading. In addition to trading systems, the development of matching and settlement systems brought together millions of traders from all over the world, causing the brokerage markets to swell.

The technological revolution, the tremendous advances in computer software and communication systems, and the accumulation of experience have increased the level of professionalism of forex traders and developed their ability to make profits and manage risks significantly. These factors combined contributed to the boom in trading volumes in recent years.

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