The Foreign Exchange Market in 1970s-1980s
After the World War II international trade saw a rapid expansion primarily due to post-war construction. The result of the massive movements of capital destabilized the foreign exchange rate that had been established by the Bretton Woods Agreement.
The countries abandoned the Bretton Woods Agreement in 1971 because after the World War II, countries saw a rapid expansion of their capital because of post-war construction. A destabilization of the foreign exchange rate established by The Bretton Agreement happened.
At that time it was not possible to convert the US dollar to gold anymore. Then in 1973, the currencies of the industrialized nations became freer floating. The markets became controlled by the forces of supply and demand. The market had prices set with speed as well as volume. The markets also created a new kind of financial instrument which is the deregulation of the markets and open trading. The negative effective of which gave rise to the trend of speculation.
With the advent of modern technology such as computers in the 1980's, a continuum of trading across the Asian, European and American markets came about. These huge markets have dealing rooms where millions and millions are exchanged. Daily trading in the foreign exchange market have electronic brokers today which makes this possible. In London single trades for dollars are priced in a matter of seconds. Today most financial brokers and traders carry out business transactions not to buy and sell goods from the market but to speculate.
In the 1950's, Russia's oil revenue was all in US dollars and was deposited outside of United States in fear of being frozen by the authorities, so the Euro-dollar market was established in London. The resulting high cash reserves attracted foreign investors. They also had fewer regulations and higher revenues. The London foreign exchange market continues to grow as more and more American and European banks came to the city to start their office there. However, the smaller financial institutions and private sectors have a difficult time trying to get access to the competitive market because of failing to meet the criteria for credit.
Today the markets deals with huge transactions. The smaller banks, commercial hedgers and private investors cannot or have difficulty accessing the competitive market. They have no direct access at all. These days the smaller financial institutions are allowed to break down the large units and the opportunity for buying and selling those smaller units.