Today's foreign exchange market (also known as "Forex" or "FX") originated in 1973. However, currency in some form or another has circulated and has been in use since the time of Pharaoh. The Babylonians are credited with the first use of paper bills and receipts. Middle eastern moneychangers were the first true currency traders, exchanging coins of one culture for another.
During the Middle Ages, paper bills representing transferable third-party payments of funds replaced coins as the currency of choice. This development made foreign exchange much easier for merchants and traders and played a central role in helping the regional economies to flourish.
From the Middle Ages through the first World War, the currency markets were relatively stable and without much speculative activity. After WW I, however, the forex markets became very volatile, and speculative activity increased tenfold. Initially, neither most financial institutions nor the public in general looked favorably upon currency speculation. The Great Depression and the removal of the gold standard in 1931 created a serious lull in forex activity.
From 1931 until 1973, the forex market underwent a series of changes that greatly impacted the global economy during this period. There was very little, if any, speculation in the forex markets during this time frame
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