Historical Foreign Currency Exchange

Since ancient times, humans have been doing trade with the surroundings for various reasons by way of barter system. Along with age and civilization perkembangnya barter system this fall because it has many weaknesses that
found in the system - a new payment system to the end by using money as a medium of exchange and payment. Payment system using the money also has a weakness to trade with a country that has a different type of currency.

The need arises because the exchange rate a country's currency is usually not accepted as a medium or a medium of exchange in another country. International trade relations gave rise to the demand and supply on some currency. This then led to the development on the stock exchange foreign currency, so the regulators need to multi-million demand and supply transactions that occur every day, which lead to the determinants of foreign currency exchange rates.

Historical exchange / currency trading can be said as old as money itself, and just got serious attention by many countries in the last decade. If the gold standard of review in the decade (1880 - the outbreak of World War I), at the time the money is guaranteed by the pure gold which is a standard country. Balance of payments deficit will be closed with the transfer of gold, to result in money supply decreases and prices rise as overseas, so this will increase exports to the deficit disappeared, and vice versa. Thus, the value of the currency relatively stable.

Until World War I, the gold standard enable the achievement of high levels of correction to the balance of payments. But not so in time of war, most likely due to the growth of trade unions and large corporations, a guaranteed wage and price so that is not easy to reduce this tendency, reduced-impact jobs. Because of swelling unemployment in the early 1930s, the gold standard is not used anymore.

After the world war is finished and the world economic depression in 1930 - an, the world wants a better economic stability. So On July 22, 1944, on the initiative of the United States, held a conference of the International Monetary known as: "The Bretton Woods Conference", which was attended by 44 countries. The proposal submitted by the delegation of the United States (White Plan) developed the basic plans are approved.

At the conference, created a fixed currency exchange system called the "Fixed Exchange Rate System", which has some similarities with the gold standard, which includes the following provisions:

1. Each country set its exchange rate against USD currency;
2. America sets the value of USD against gold (USD 35/ounce);
3. America will sell gold at fixed prices to the official holders of the USD;
4. Changes in currency exchange rates against the USD should not exceed 1%, when forced to be up to 10% max.

Since then countries - countries in the world and America began to grow rapidly and two years after the conference, established the international monetary institutions and the World Bank that we know today with the IMF (International Monetary Fund) and the Word Bank, to oversee the system.

Then a change occurred in the United States, In the period of the 1960s, the U.S. balance of payments deficit to force the country off the gold reserve amounted to USD 18 billion for France to exchange USD her with gold and continue the period of the 1970s, Americans again have to release the reserve gold amounted to USD 11 billion. Poor U.S. economy at that time led the world community lack confidence against the USD. And in a country that has a strong currency because it has sufficient reserves of gold, such as Switzerland and Germany, they exchange USD him with their currency is CHF and MDK. This causes short-term debt maturing in America almost reached nearly twice its gold reserves.

Bretton Woods system is only able to survive nearly 30 years, on August 15, 1971, President Nixon announced a change in the exchange rate system to allow its exchange rate to USD with floating (Floating Exchange Rate System), this is reiterated in a conference in Washington on 17 -18 December 1971 (Smithsonian CONFERENCE), hence the birth of a floating exchange rate and is valid up to now.

After President Nixon set a float value to the USD, many countries decided to float its exchange rate, such as: German, English, Dutch, Japanese and even years - following years many countries in the world to let the value of money floating in accordance with market mechanism, namely forces of demand and supply.