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.

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History of "DOLLAR $" Becoming International Currency

Starting from the Bretton Woods agreement after World War 2 that the effect is still felt to this day; agreement to use gold as a global standard currency values. At that time the economic situation world countries except the United States, devastated by war. This causes them to rely on loans granted by the United States.
The loan is given in U.S. dollars. As collateral, the United States receives the gold owned by these countries. As a result, the United Auto mastered all the gold in the world and become only the U.S. dollar value is backed by gold.

In practical terms, this means the U.S. dollar has replaced gold as a source of liquidity in the world economy and become the basis of the world's financial system. The implication, every country to build reserves in U.S. dollars; dollar reserves required for the respective country's currency can be exchanged for dollars or gold. At this time it was the U.S. currency becomes an international currency.

The second reason: the risk becomes an international currency

Not always become an international currency that has a positive effect on countries that have a currency that, in this case American countries with the dollar. Many negative effects that could hit America when the currency becomes an international currency. Some negative effects become an international currency, among others:

1. The country had to maintain trust, which causes it to have a tough task for the world.

2. If the owner of an international currency is not able to maintain trust, it can cause the currency drop suddenly.

3. It would be more difficult in controlling liquidity

The third reason: not all that strong currency could become an international currency

To become an international currency needs a strong owner, in this country strong. Being a strong currency does not mean able to become an international currency. This is because countries that have currencies that do not necessarily have the economic and political stability is good. Yet to become an international currency, it takes a country with economic and political situation is stable, because as an international currency is needed trust from the world for the world to use it.

For example, the currency of the country of Iraq, the dinar. Although currently dinar as one of the strongest currencies, but the state of Iraq is unstable, because of war, internal conflict, and its economy. This causes the world does not want to entrust its currency to the Iraqi Dinar currency because although it is strongest, but not necessarily in the long term will be stable.

Unstable can occur because of the war that is increasingly becoming-so or conflict in a country which can ultimately lead to the country's impoverished and its currency fell to the weakest currency. Whereas exchange currency and store it is a long-term activities, so it takes great confidence from the world. This is because the U.S. dollar became the currency of the world because it is believed that the country can be predicted to be stable in the long term

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