Forex
Definition:
FOREX, what can this term we often hear about mean? It is simple:
Foreign Exchange. Just like firms sell and buy parts of other
firms, currencies can be exchanged too. Every day, currencies
go to one country to another, without us paying any attention.
Functioning:
FOREX is quite different from the trade of real estate values
managed by stock exchange places throughout the world. According
to it, there is no need to have a « firm », nowadays,
a telephone or an e-mail are enough to be able to sell or buy
currencies from any country without moving.
History:
However, it is important to know that FOREX has not always existed.
Before World War I, the value of each currency was calculated
according to the quantities of gold in stock in every country.
After World War I, everything changes, as gold could not circulate
freely. Then the Bretton Woods Agreements intervene. Every country
that adhered to this « treaty » will see the value
of their currency be re-evaluated, no longer according to gold,
but to the dollar. Then, as the number of transactions increased,
the circulation of currencies does the same and follows a constant
growth. The Bretton woods Agreements will finally be dropped
in 1971. It is then that currencies are going to be sold and
bought freely and their prices are going to vary faster and
faster, and more and more often for they are submitted to the
system of supply and demand.
Nowadays:
Today, FOREX is still evolving every day and the number of transactions
keeps increasing. The new technologies that enabled fast and
numerous exchanges, the sums exchanged are no longer counted
in billions but in trillions. The transactions are directly
made between sellers and buyers, without any intermediaries
like on stock exchange places. It functions 24/7 and it goes
around the world every day. It “gets up” in Australia,
in Sidney, to end its day in the United States. Thus, people
investing in currencies have a whole day to react to the numerous
fluctuations and face unpredicted events and economic, social
or political new developments as soon as they hear about them.
So,
FOREX could be compared to a huge basket around which each country
does its daily shopping and exchange billions and billions «
little notes » that cross the borders in just a few seconds.
In the morning in Sidney, at night in New York by going through
London, Paris and Tokyo.
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