Today's market for the online Forex trading system is worth over $3 trillion; consequently, it is among the greatest on the planet. With currency exchange rates going up and down daily, one may wonder how foreign exchange (forex) rates are determined. Among the elements influencing everyday forex rates is the kind of foreign exchange rate imposed in the currency: fixed or floating
Economic recovery was simpler said than done in the period after the Second World War; countries that sustained serious damage fought to get the gears up and running once more. Since the USA largely capitalized on the war in terms of economic development, a lot of countries pegged their currency values to the US dollar. At that time, the dollar was a set currency, meaning its total value depended on the amount that the central bank can provide.
To state it simply, a set currency system requires the central bank to keep the value equal to the value specified. Following the Second World War, many global currencies determined their value depending on the worth of U.S. gold reserves. This granted temporary security for countries ruined by destructive conflict.
However, nobody uses the set currency policy anymore; in fact, the last set currency, the Chinese Yuan, shifted to the floating currency policy in 2005. In the 1960s, the United States began to feel the effects of pegging currency values on gold reserves. As such, in 1971, the-then Head of State Nixon ordered the end of the fixed currency policy for good.
Currencies around the world have since adopted the shifting currency policy, where currency values now depend on supply and demand. The central bank no longer directs the value of a country's currency; instead, it's the duty of the global Forex trading system. In a shifting currency world, the currencies self-correct based upon the supply and demand for the currency. The worth of the currency fluctuates despite how much it has increased or gone down in the past few days.
If you wish to know even more about Forex trading, you may see the website of the International Monetary Fund at IMF.org. A simplified description can be seen in articles at the following sites: ExchangesJournal.org and Investopedia.com.
Simple Info on the Forex Trading System