SigmaForex Discusses The Central Banks More

The Bank of Japan has deviated from the Federal Reserve model in terms of independence. Although its Policy Board is still fully in charge of monetary policy, changes are still subject to the approval of the Ministry of Finance (MOF).

The BOJ targets the M2 aggregate. On a quarterly basis, the BOJ releases its Tankan economic survey. Tankan is the Japanese equivalent of the American tan book, which presents the state of the economy. The Tankan's findings are not automatic triggers of monetary policy changes. Generally, the lack of independence of a central bank signals inflation.

This is not the case in Japan, and it is yet another example of how different fiscal or economic policies can have opposite effects in separate environments. The Bank of England may be characterized as a less independent central bank, because the government may overrule its decision. The BOE has not had an easy tenure.

Despite the fact that British inflation was high through 1991, reaching double-digit rates in the late 1980s, the Bank of England did a marvelous job of proving to the world that it was able to maneuver the pound into mirroring the Exchange Rate Mechanism. After joining the ERM late in 1990, the BOE was instrumental in keeping the pound within its 6 percent allowed range against the deutsche mark, but the pound had a short stay in the Exchange Rate Mechanism.

The divergence between the artificially high interest rates linked to ERM commitments and Britain's weak domestic economy triggered a massive sell-off of the pound in September 1992. The Bank of France has joint responsibility, with the Ministry of Finance, to conduct domestic monetary policy. Their main goals are non-inflationary growth and external account equilibrium. France has become a major player in the foreign exchange markets since the ravages of the ERM crisis of July 1993, when the French franc fell victim to the foreign exchange markets.

The Bank of Italy is in charge of the monetary policy, financial intermediaries, and foreign exchange. Like the other former European Monetary System central banks, BOI's responsibilities shifted domestically following the ERM crisis. Along with the Bundesbank and Bank of France, the Bank of Italy is now part of the European System of Central Banks (ESCB).
The Bank of Canada is an independent central bank that has a tight rein on its currency. Due to its complex economic relations with the United States, the Canadian dollar has a strong connection to the U.S. dollar.

The BOC intervenes more frequently than the other G7 central banks to shore up the fluctuations of its Canadian dollar. The central bank changed its intervention policy in 1999 after admitting that its previous mechanical policy, of intervening in increments of only $50 million at a set price based on the previous closing, was not working.

SigmaForex Discusses The Central Banks

The Central Banks of the Other G-7 Countries

In the wake of World War II, both Germany and Japan were helped to develop new financial systems. Both countries created central banks that were fundamentally similar to the Federal Reserve. Along the line, their scope was customized to their domestic needs and they diverged from their model.

The European Central Bank was set up on June 1, 1998 to oversee the ascent of the euro. During the transition to the third stage of economic and monetary union (introduction of the single currency on January 1, 1999), it was responsible for carrying out the Community's monetary policy. The ECB, which is an independent entity, supervises the activity of individual member European central banks, such as Deutsche Bundesbank, Banque de France, and Ufficio Italiano dei Cambi. The ECB's decision-making bodies run a European System of Central Banks whose task is to manage the money in circulation, conduct foreign exchange operations, hold and manage the Member States' official foreign reserves, and promote the smooth operation of
payment systems.

The ECB is the successor to the European Monetary Institute (EMI). The German central bank, widely known as the Bundesbank, was the model for the ECB. The Bundesbank was a very independent entity, dedicated to a stable currency, low inflation, and a controlled money supply. The hyperinflation that developed in Germany after World War I created a fertile economic and political scenario for the rise of an extremist political party and for the start of World War II. The Bundesbank's chapter obligated it toavoid any such economic chaos.

Naked intervention | SigmaForex

Naked intervention, or unsterilized intervention, refers to the sole foreign exchange activity. All that takes place is the intervention itself, in which the Federal Reserve either buys or sells U.S. dollars against a foreign currency.

In addition to the impact on the foreign exchange market, there is also a monetary effect on the money supply. If the money supply is impacted, then consequent adjustments must be made in interest rates, in prices, and at all levels of the economy.

Therefore, a naked foreign exchange intervention has a long-term effect. Sterilized intervention neutralizes its impact on the money supply. As there are rather few central banks that want the impact of their intervention in the foreign exchange markets to affect all corners of their economy, sterilized interventions have been the tool of choice.

This holds true for the Federal Reserve as well. The sterilized intervention involves an additional step to the original currency transaction. This step consists of a sale of government securities that offsets the reserve addition that occurs due to the intervention. It may be easier to visualize it if you think that the central bank will finance the sale of a currency through the sale of a number of government securities. Because a sterilized intervention only generates an impact on the supply and demand of a certain currency, its impact will tend to have a short-to medium-term effect.

SigmaForex Illustrates How Major Central Banks Are Involved in Forex Operations

The major central banks are involved in foreign exchange operations in more ways than intervening in the open market. Their operations include payments among central banks or to international agencies.

In addition, the Federal Reserve has entered a series of currency swap arrangements with other central banks since 1962. For instance, to help the allied war effort against Iraq's invasion of Kuwait in 1990-1991, payments were executed by the Bundesbank and Bank of Japan to the Federal Reserve. Also, payments to the World bank or the United Nations are executed through central banks. Intervention in the United States foreign exchange markets by
the U.S.

Treasury and the Federal Reserve is geared toward restoring orderly conditions in the market or influencing the exchange rates. It is not geared toward affecting the reserves. There are two types of foreign exchange interventions: naked intervention and sterilized intervention.

The Federal Reserve System of the USA | SigmaForex

The Federal Reserve System of the USA

Like the other central banks, the Federal Reserve of the USA affects the foreign exchange markets in three general areas:

* the discount rate;

* the money market instruments;

* foreign exchange operations.

For the foreign exchange operations most significant are repurchase agreements to sell the same security back at the same price at a predetermined date in the future (usually within 15 days), and at a specific rate of interest. This arrangement amounts to a temporary injection of reserves into the banking system. The impact on the foreign exchange market is that the dollar should weaken.

The repurchase agreements may be either customer repos or system repos. Matched sale-purchase agreements are just the opposite of repurchase agreements.

When executing a matched sale-purchase agreement, the Fed sells a security for immediate delivery to a dealer or a foreign central bank, with the agreement to buy back the same security at the same price at a predetermined time in the future (generally within 7 days).

This arrangement amounts to a temporary drain of reserves. The impact on the foreign exchange market is that the dollar should strengthen.

Trading Systems with SigmaForex - Part3

Matching Systems

Unlike dealing systems, on which trading is not anonymous and is conducted on a one-on-one basis, matching systems are anonymous and individual traders deal against the rest of the market, similar to dealing in the brokers' market.

However, unlike the brokers' market, there are no individuals to bring the prices to the market, and liquidity may be limited at times. Matching systems are well-suited for trading smaller amounts as well. The dealing systems characteristics of speed, reliability, and safety are replicated in the matching systems.

In addition, credit lines are automatically managed by the systems. Traders input the total credit line for each counter party. When the credit line has been reached, the system automatically disallows dealing with the particular party by displaying credit restrictions, or shows the trader only the price made by banks that have open lines of credit.

As soon as the credit line is restored, the system allows the bank to deal again. In the interbank market, traders deal directly with dealing systems, matching systems, and brokers in a complementary fashion.

Trading Systems with SigmaForex - Part2

Dealing systems are on-line computers that link the contributing banks around the world on a one-on-one basis. The performance of dealing systems is characterized by speed, reliability, and safety.

Accessing a bank through a dealing system is much faster than making a phone call. Dealing systems are continuously being improved in order to offer maximum support to the dealer's main function: trading. The software is very reliable in picking up the big figure of the exchange rates and the standard value dates.

In addition, it is extremely precise and fast in contacting other parties, switching among conversations, and accessing the database. The trader is in continuous visual contact with the information exchanged on the monitor.

It is easier to see than hear this information, especially when switching among conversations. Most banks use a combination of brokers and direct dealing systems. Both approaches reach the same banks, but not the same parties, because corporations, for instance, cannot deal in the brokers' market.

Traders develop personal relationships with both brokers and traders in the markets, but select their trading medium based on price quality, not on personal feelings. The market share between dealing systems and brokers fluctuates based on market conditions. Fast market conditions are beneficial to dealing systems, whereas regular market conditions are more beneficial to brokers.

Trading Systems with SigmaForex - Part1

Direct dealing is based on trading reciprocity. A market maker—the bank making or quoting a price—expects the bank that is calling to reciprocate with respect to making a price when called upon.

Direct dealing provides more trading discretion, as compared to dealing in the brokers' market. Sometimes traders take advantage of this characteristic.

Direct dealing used to be conducted mostly on the phone. Dealing errors were difficult to prove and even more difficult to settle. In order to increase dealing safety, most banks tapped the phone lines on which trading was conducted.

This measure was helpful in recording all the transaction details and enabling the dealers to allocate the responsibility for errors fairly. But tape recorders were unable to prevent trading errors. Direct dealing was forever changed in the mid - 1980s, by the introduction of dealing systems.

Types Of Analysis with SigmaForex

Fundamental and technical analyses are used for forecasting the future direction of the currency. A trader might test the market by hitting a bid for a small amount to see if there is any reaction.

Brokers cannot be forced into taking a principal's role if the name switch takes longer than anticipated.

Another advantage of the brokers' market is that brokers might provide a broader selection of banks to their customers.

Some European and Asian banks have overnight desks so their orders are usually placed with brokers who can deal with the American banks, adding to the liquidity of the market.

SigmaForex Clarify The Anonymity Of Prices

Prices are anonymous the anonymity of the banks that are trading in the market ensures the market's efficiency, as all banks have a fair chance to trade.

Brokers charge a commission that is paid equally by the buyer and the seller. The fees are negotiated on an individual basis by the bank and the brokerage firm.

Brokers show their customers the prices made by other customers either two-way (bid and offer) prices or one way (bid or offer) prices from his or her customers.

Traders show different prices because they "read" the market differently; they have different expectations and different interests.

A broker who has more than one price on one or both sides will automatically optimize the price.

In other words, the broker will always show the highest bid and the lowest offer. Therefore, the market has access to the narrowest spread possible.

Foreign Exchange Market Through SigmaForex

Foreign exchange brokers, unlike equity brokers, do not take positions for themselves; they only service banks. Their roles are:

* bringing together buyers and sellers in the market;

* optimizing the price they show to their customers;

*quickly, accurately, and faithfully executing the traders' orders.

The majority of the foreign exchange brokers execute business via phone. The phone lines between brokers and banks are dedicated, or direct, and are usually in-stalled free of charge by the broker. A foreign exchange brokerage firm has direct lines to banks around the
world. Most foreign exchange is executed through an open box system—a microphone in front of the broker that continuously transmits everything he or she says on the direct phone lines to the
speaker boxes in the banks.

This way, all banks can hear all the deals being executed. Because of the open box system used by brokers, a trader is able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and thenames of the banks showing the prices.

Major Currencies In SigmaForex - Swiss Franc

The Swiss Franc

The Swiss franc is the only currency of a major European country that belongs neither to the European Monetary Union nor to the G-7 countries.

Although the Swiss economy is relatively small, the Swiss franc is one of the four major currencies, closely resembling the
strength and quality of the Swiss economy and finance. Switzerland has a very close economic relationship with Germany, and thus to the euro zone.

Therefore, in terms of political uncertainty in the East, the Swiss franc is favored generally over the euro.

Typically, it is believed that the Swiss franc is a stable currency. Actually, from a foreign exchange point of view, the Swiss franc closely resembles the patterns of the euro, but lacks its liquidity. As the demand for it exceeds supply, the Swiss franc can be more volatile than the euro.

Major Currencies In SigmaForex - British Pound

The British Pound

Until the end of World War II, the pound was the currency of reference. Its nickname, cable, is derived from the telex machine, which was used to trade it in its heyday. The currency is heavily traded against the euro and the U.S. dollar, but has a spotty presence against other currencies.

The two-year bout with the Exchange Rate Mechanism, between 1990 and 1992, had a soothing effect on the British pound, as it generally had to follow the deutsche mark's fluctuations, but the crisis conditions that precipitated the pound's withdrawal from the ERM had a psychological effect on the currency.

Prior to the introduction of the euro, both the pound benefited from any doubts about the currency convergence. After the introduction of the euro, Bank of England is attempting to bring the high U.K. rates closer to the lower rates in the euro zone. The pound could join the euro in the early 2000s, provided that the U.K. referendum is positive.

Major Currencies In SigmaForex - Japanese Yen

The Japanese Yen

The Japanese yen is the third most traded currency in the world; it has a much smaller international presence than the U.S. dollar or the euro. The yen is very liquid around the world, practically around the clock.

The natural demand to trade the yen concentrated mostly among the Japanese keiretsu, the economic and financial conglomerates.

The yen is much more sensitive to the fortunes of the Nikkei index, the Japanese stock market, and the real estate market. The attempt of the Bank of Japan to deflate the double bubble in these two markets had a negative effect on the Japanese yen, although the impact was short-lived

Major Currencies In SigmaForex - Euro

The Euro

The euro was designed to become the premier currency in trading by simply being quoted in American terms. Like the U.S. dollar, the euro has a strong international presence stemming from members of the European Monetary Union.

The currency remains plagued by unequal growth, high unemployment, and government resistance to structural changes. The pair was also weighed in 1999 and 2000 by outflows from foreign investors, particularly Japanese, who were forced to liquidate their losing investments in euro denominated assets.

Moreover, European money managers rebalanced their portfolios and reduced their euro exposure as their needs for hedging currency risk in Europe declined.

Major Currencies In SigmaForex - U.S Dollar

The U.S. Dollar

The United States dollar is the world's main currency. All currencies are generally quoted in U.S. dollar terms. Under conditions of international economic and political unrest, the U.S. dollar is the main safe-haven currency which was proven particularly well during the Southeast Asian crisis of 1997-1998.

The U.S. dollar became the leading currency toward the end of the Second World War and was at the center of the Bretton Woods Accord, as the other currencies were virtually pegged against it. The introduction of the euro in 1999 reduced the dollar's importance only marginally.

The major currencies traded against the U.S. dollar are the euro, Japanese yen, British pound, and Swiss franc.

SigmaForex Sums The Factors Caused Foreign Exchange Volume Growth-4

Developments in Telecommunications

The introduction of automated dealing systems in the 1980s, of matching systems in the early 1990s, and of Internet trading in the late 1990s completely altered the way foreign exchange was conducted. The dealing systems are online computer systems that link banks on a one-to-one basis, while matching systems are electronic brokers.

They are reliable and much faster, allowing traders to conduct more simultaneous trades. They are also safer, as traders are able to see the deals that they execute. The dealing systems had a major role in expanding the foreign exchange business due to their reliability, speed, and safety.

Computer and Programming development

Computers play a significant role at many stages of conducting foreign exchange. In addition to the dealing systems, matching systems simultaneously connect all traders around the world, electronically duplicating the brokers' market.

The new office systems provide full accounting coverage, ticket writing, back office processing, and risk management implementation at a fraction of their previous cost. Advanced software makes it possible to generate all types of charts, augment them with sophisticated technical studies, put them at traders' fingertips on a continuous basis at a rather limited cost.

SigmaForex Sums The Factors Caused Foreign Exchange Volume Growth-3

Increasing of Corporate Interest

A successful performance of a product or service overseas may be pulled down from the profit point of view by adverse foreign exchange conditions and vice versa. An accurate handling of the
foreign exchange may enhance the overall international performance of a product or service.

Proper handling of foreign exchange generally adds substantially to the rate of return. Therefore, interest in foreign exchange has increased in the past decade. Many
corporations are using currencies not only for hedging, but also for capitalizing on opportunities that exist solely in the currency markets.

Increasing of Traders Sophistication

Advances in technology, computer software, and telecommunications and increased experience have increased the level of traders' sophistication. This enhanced traders' confidence in their ability to both generate profits and properly handle the exchange risks. Therefore, trading sophistication led toward volume increase.

SigmaForex Sums Up The Factors Caused Foreign Exchange Volume Growth-2

Interest Rate Volatility

Economic internationalization generated a significant impact on interest rates as well. Economics became much more interrelated and that exacerbated the need to change interest rates faster.

Interest rates are generally changed in order to adjust the growth in the economy, and interest rate differentials have a substantial impact on exchange rates.

Business Internationalization

In recent decades the business world the competition has intensified, triggering a worldwide hunt for more markets and cheaper raw materials and labor.

The pace of economic internationalization picked up even more in the 1990s, due to the fall of Communism in Europe and to up-and-down economic and financial development in both Southeast Asia and South America. These changes have been positive toward foreign exchange, since more transactional layers were added.

SigmaForex Sums Up The Factors Caused Foreign Exchange Volume Growth-1

Foreign exchange trading is generally conducted in a decentralized manner, with the exceptions of currency futures and options. Foreign exchange has experienced spectacular growth in volume ever since currencies were allowed to float freely against each other.

While the daily turnover in 1977 was U.S. $5 billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion mark in September 1992, and stabilized at around $1,5 trillion by the year 2000.

Main factors influence on this spectacular growth in volume are indicated below.

For foreign exchange, currency volatility is a prime factor in the growth of volume. In fact, volatility is a sine qua non condition for trading. The only instruments that may be profitable under conditions of low volatility are currency options.

The European Monetary Cooperation Fund | SigmaForex

The European Monetary Cooperation Fund was established to manage the EMS' credit arrangements. In order to increase the acceptance of the ECU, countries that hold more ECU deposits, or accept as loan repayment more than their share of ECU, receive interest on the excess ECU deposits, and vice versa. The interest rate is the weighted average of all the EMS members' discount rates.

In 1998 the Euro was introduced as an all-European currency. Here are the official locking rates of the 11 participating European currencies in the euro (EUR). The rates were proposed by the EU Commission and approved by EU finance ministers on December 31, 1998, ahead of the launch of the euro at midnight, January 1, 1999.

The real starting date was Monday, January 4, 1999. The conversion rates are:

1 EUR = 40.3399 BEF 1 EUR = 1.95583 DEM
1 EUR = 166.386 ESP 1 EUR = 6.55957 FRF
1 EUR = 0.787564 IEP 1 EUR = 1936.27 ITL
1 EUR = 40.3399 LUF 1 EUR = 2.20371 NLG
1 EUR = 13.7603 ATS 1 EUR = 200.482 PTE
1 EUR = 5.94573 FIM

The euro bills are issued in denominations of 5, 10, 20, 50, 100, 200, and 500 euros. Coins are issued in denominations of 1 and 2 euros, and 50, 20,10, 5, 2, and 1 cent.

SigmaForex Clarify The Reasons For The Proposed Common Currency

A conference of national leaders in 1969 set the objective of establishing a monetary union within the European Community. This goal was supposed to be implemented by 1980, when a common currency was planned to be used in Europe. The reasons for the proposed common currency unit were to stimulate inter-European trade and to weld together the individual member economies in order to compete successfully with the economies of the United States and Japan.

In 1978, the nine members of the European Community ratified a new plan for stability—the European Monetary System. The new system was practically established in 1979. Seven countries were then full members—West Germany, France, the Netherlands, Belgium, Luxembourg, Denmark, and Ireland. Great Britain did not participate in all of the arrangements and Italy joined under special conditions. Greece joined in 1981, Spain and Portugal in 1986. Great Britain joined the Exchange Rate Mechanism in 1990.

SigmaForex Illustrates The European Community

The European Community consists of four executive and legislative bodies:

1. The European Commission. The executive body in charge of making and observing the enforcement of the policies. Since it lacks an enforcement arm, the commission must rely on individual governments to enforce the policies. There are 23 departments, such as foreign affairs, competition policy, and agriculture. Each country selects its own representatives for four-year terms. The commission is based in Brussels and consists of 17 members.

2. The Council of Ministers. Makes the major policy decisions. It is composed of ministers from the 12 member nations. The presidency is held for six months by each of the members, in alphabetical order.

The meetings take place in Brussels or in the capital of the nation holding the presidency.

3. The European Parliament. Reviews and amends legislative proposals and has the power to adopt or reject budget proposals. It consists of 518 elected members. It is based in Luxembourg, but the sessions take place in Strasbourg or Brussels.

4. The European Court of Justice. Settles disputes between the EC and the member nations. It consists of 13 members and is based in Luxembourg. In 1963, the French-West German Treaty of Cooperation was signed. This pact was designed not only to end centuries of bellicose rivalry, but also to settle the postwarreconciliation between two major foes. The treat stipulated that West Germany would lead economically through the cold war, and France, the former diplomatic powerhouse, would provide the political leadership.

The premise of this treaty was obviously correct in an environment defined by a foreseeable long-term continuing cold war and a divided Germany. Later we will discuss the implications for the modern era of this enormously expensive pact.

The creation of the European Monetary Union | SigmaForex

The creation of the European Monetary Union was the result of a long and continuous series of post-World War II efforts aimed at creating closer economic cooperation among the capitalist European countries. The European Community (EC) commission's officially stated goals were to improve the inter- European economic cooperation, create a regional area of monetary stability, and act as "a pole of stability in world currency markets."

The first steps in this rebuilding were taken in 1950, when the European Payment Union was instituted to facilitate the inter- European settlements of international trade transactions. The purpose of the community was to promote inter-European trade in general, and to eliminate restrictions on the trade of coal and raw steel in particular. In 1957, the Treaty of Rome established the European Economic Community, with the same signatories as the European Coal and Steel Community.

The stated goal of the European Economic Community was to eliminate customs duties and any barriers against the transit of capital, services, and people among the member nations. The EC also started to raise common tariff barriers against outsiders.

SigmaForex Discusses Free-Foating Of Currencies

Since 1978 free-floating of currencies were officially mandated by the International Monetary Fund. That is the currency may be traded by anybody and its value is a function of the current supply and demand forces in the market, and there are no specific intervention points that have to be observed. Of course, the Federal Reserve Bank irregularly intervenes to change the value of the U.S. dollar, but no specific levels are ever imposed. Naturally, free-floating currencies are in the heaviest trading demand. Free-floating is not the sine qua non condition for trading. Liquidity is also an indispensable condition.

A tool for people and corporations to protect investments in times of economic or political instability is currency reserves for international transactions. Immediately after the World War II the reserve currency worldwide was the U.S. dollar. Currently there are other reserve currencies: the euro and the Japanese yen. The portfolio of reserve currencies may change depending on specific international conditions, for instance it may include the Swiss franc.

The Purpose Of IMF | SigmaForex

The purpose of IMF is to consult with one another to maintain a table system of buying and selling the currencies, so that payments in foreign money can take place between countries smoothly and timely. The IMF lends money to members who have trouble meeting financial obligations to other members, on the condition that they undertake economic reforms to eliminate these difficulties for their own good and the good of the entire membership.

In total the main tasks of the IMF are:

* to promote international cooperation by providing the means for members to consult and collaborate on international monetary issues;

* to facilitate the growth of international trade and thus contribute to high levels of employment and real income among member nations;

* to promote stability of exchange rates and orderly exchange agreements, and [to] discourage competitive currency depreciation;

* to foster a multilateral system of international payments, and to seek the elimination of exchange restrictions that hinder the growth of world trade;

* to make financial resources available to members, on a temporary basis and with adequate safeguards, to permit them to correct payments imbalances without resorting to measures destructive to national and international prosperity.

To execute these goals the IMF uses such instruments as Reserve tranche which allows a member to draw on its own reserve asset quota at the time of payment, Credit tranche drawings and stand-by arrangements are the standard form of IMF loans, the compensatory financing facility extends financial help to countries with temporary problems generated by reductions in export revenues, the buffer stock financing facility which is geared toward assisting the stocking up on primary commodities in order to ensure price stability in a specific commodity and the extended facility designed to assist members with financial problems in amounts or for periods exceeding the scope of the other facilities.

SigmaForex Highlights The Bretton Woods Accord

The Bretton Woods Accord was signed in July 1944 by the United States, Great Britain, and France which agreed to make the currency market stable, particularly due to governmental controls on currency values. In order to implement it, two major goals were: emphasized: to provide the pegging (backing of prices) of currencies and to organize the International Monetary Fund (IMF).

In accordance to the Bretton Woods Accord, the major trading currencies were pegged to the U.S. dollar in the sense that they were allowed to fluctuate only one percent on either side of that rate.

When a currency exceeded this range, marked by intervention points, the central bank in charge had to buy it or sell it, and thus bring it back into range. In turn, the U.S. dollar was pegged to gold at $35 per ounce. Thus, the U.S. dollar became the world's reserve currency.

SigmaForex Views Of Foreign Exchange Development

What are the Main Stages of Recent Foreign Exchange Development ?

In modern times there were some developments in forex market SigmaForex summed them up in the coming lines:

The main phases of the further development of the Forex in modern times were:

* signing of the Bretton Woods Accord;

* constitution of the international monetary fund (IMF);

* emergency of the free-floating

foreign exchange markets;

* creation of currency reserves;

* constitution of the European Monetary Union and the European Monetary Cooperation Fund;

*

introduction of the Euro as a currency.

History Of Currency Trading With SigmaForex

Currency trading has a long history and can be traced back to the ancient Middle East and Middle Ages when foreign exchange started to take shape after the international merchant bankers devised bills of exchange, which were transferable third-party payments that allowed flexibility and growth in foreign exchange dealings.

The modern foreign exchange market characterized by the consequent periods of increased volatility and relative stability formed itself in the twentieth century. By the mid-1930s London became to be the leading center for foreign exchange and the British pound served as the currency to trade and to keep as a reserve currency.

Because in the old times foreign exchange was traded on the telex
machines, or cable, the pound has generally the nickname “cable”.

In 1930, the Bank for International Settlements was established in Basel, Switzerland, to oversee the financial efforts of the newly independent countries, emerged after the World War I, and to provide monetary relief to countries experiencing temporary balance of payments difficulties.

After the World War II, where the British economy was destroyed and the United States was the only country unscarred by war, U.S. dollar became the prominent currency of the entire globe.

Nowadays, currencies all over the world are generally quoted against the U.S. dollar.

SigmaForex Explanation Of Forex

Currency exchange is very attractive for both the corporate and individual traders who make money on the Forex - a special financial market assigned for the foreign exchange. The following features make this market different in compare to all other sectors of the
world financial system:

*heightened sensibility to a large and continuously changing number of factors;
* accessibility to all traders in the major currencies;
* guaranteed quantity and liquidity of the major currencies;
* increased consideration for several currencies, round-the clock business hours which enable traders to deal after normal hours or during national holidays in their country finding markets abroad open

And

* extremely high efficiency relative to other financial markets.

This goal of this manual is to introduce beginning traders to all the
essential aspects of foreign exchange in a practical manner and to be a source of best answers on the typical questions as why are currencies being traded, who are the traders, what currencies do they trade, what makes rates move, what instruments are used for the trade, how a currency behavior can be forecasted and where the pertinent information may be obtained from.

Mastering the content of an appropriate section the user will be able to make his/her own decisions, test them, and ultimately use recommended tools and approaches for his/her own benefit.