Standard Bank Forex History

5 Economic Events When Currency Rocked The World

These are changes in the currency markets which caused substantial impact in the world economy. It is important that people learn about currency movements and how the occurrence of such events provide lucrative opportunities for currency investors to profit from the forex markets.

Free Market Capitalism is Born

On August 15 1971, this date marked the end of the Bretton Woods system, a system that used to fix the value of a currency to the value of gold. The United States pulled out of the Bretton Woods Accord and took the US off the established Gold exchange Standard.

US were running a balance of payments deficit and a trade deficit back in the early 1970s due to the costs of Vietnam War and increased domestic spending has accelerated inflation. The US government used up almost all of his reserves and gold reserves by that time. Hence it began to print more dollars to supplement its expenditure. In short, most countries lost faith in the dollar as it is overvalued against gold. The international community dumped their dollars in exchange for gold. Standard Bank Forex History

The fact is there was not enough gold in the US vault to pay back the international community. US government had printed too much dollar and they were broke.

Following that, President Nixon shocked the world. The event was informally named ‘Nixon Shock’ because President Nixon and 15 advisors removed US from the Gold Exchange System without consulting the members of the international monetary system.

US dollars was the first currency to be floated- that is, exchange rates were no longer the principal method used by governments to administer monetary policy but is solely determined by supply and demand market forces. By 1976, all the major currencies were floated. The forex markets were started. Standard Bank Forex History

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