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Within the last three decades Foreign Exchange Market has integrated into the world's largest financial market. Now the volume of daily transactions is about $3 trillion. The modern structure of the Forex market was established in the early 1970's after abolishment of the Bretton Woods Agreement.


When the World War II was over, the major countries of the world established the International Monetary Fund or IMF to monitor the exchange rate activities. In July 1944 the agreement among 44 countries about establishment of the IMF was signed, at Bretton Woods, New Hampshire. This Agreement fixed currency rates to US dollar and pegged the US dollar to gold.

For decades the Bretton Woods Agreement maintained international monetary steadiness, but in late 1960's the situation began to change. Economic development of different countries, especially the United States, led to disbalance in the Forex market. Growth of inflation, constant rates' revision (the Agreement allowed slight rate adjustments) led to devaluation of currencies. The market price for gold in the US began to exceed the fixed rate and the government could not maintain it artificially any longer. In 1971 the US cancelled the Agreement and devalued their currency.


In the year of 1976 the Jamaica Conference (Kingston) took place. At the meeting of the ministers of the member-countries of the International Monetary Fund a new agreement about the structure of the international currency system was adopted, which represented a number of amendments to the IMF Statute. A model of free floating of currency rates was formed, which featured high fluctuations of the rates. Gold was no longer used to back deficit during international payments.


In 1978 a European Monetary System was established. The system had much in common with Bretton Woods as it had the Deutschemark as the main currency of the system. The axe of the system was a number of cross-rates with central and border rates of exchange. If the rate approaches the border both countries should make an intervention. The common European currency unit (ECU) was later introduced in 1979 for non-cash payments.The Rate of ECU to other currencies was counted on the basis of the fact that it was the unit of the basket of currencies of the European Monetary System member-countries.

In the next decade cross-border movements of capital accelerated greatly with the advent of personal computers and Internet-technologies thus expanding the market to Asian, European and American time zones. These technologies were employed by private investors to enter the market traditionally known as the Interbank market.

With the introduction of the Euro which replaced the ECU in 1999, eleven European countries fixed their currency rates in relation to Euro. It became the first currency able to compete with the historical leaders in the Forex market and establish the long desired stability.

In the course of time the market acquired the look and structure as we know it today.


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