History of forex  

Since the turn of the century, some serious shifts have taken place within the foreign market exchange. From 1944 until the early 1970s, the postwar foreign exchange system was the dominant system used in foreign exchange. This conference that would change the face of foreign exchange took place in Bretton Woods, New Hampshire.

At said conference, a future exchange system was discussed by 45 different nations. The end result of the conference was the formation of the International Monetary Fund (IMF). It was also the site that generated an agreement which stated that all fixed currencies in the exchange rate system would allow currencies to fluctuate one percent to gold values or the Us dollar which was previously accepted as the gold standard. This system of linking a currencies worth to gold or the us dollar became what is known as pegging.

This agreement held until December 1971 with the occurrence of the Smithsonian agreement. This agreement was in principle the same as the previous Bretton Woods one however it permitted greater fluctuations than one percent for the currencies. One year later in 1972, European countries attempted to move away from their link to the US dollar. West Germany together with France, Italy, the Netherlands, Belgium and Luxemburg founded the European Joint Float. This agreement was also like the Bretton Woods agreement, but like the Smithsonian agreement, it permitted for a larger band of fluctuations in the currency rates.

Mistakes were made in both the Smithsonian and European Joint Float causing them both to collapse by 1973. The collapse of both recent agreements in 1973 officially ushered in the ear of the free-floating system. The free floating system was somewhat of a default system since there were no new agreements to take place of the old ones. This meant that Governments had the autonomy to free to peg their currencies, semi-peg their currencies or simply allow them to float. The free-floating system became officially mandated in 1978.