Essay PreviewMore ↓
From the beginning of man-kind there has been buying selling and trading. Rice for corn, gold for coal, liquor for tea are just a few examples of trade from the beginning. But how could man-kind make this easier if they did not have anything to trade? How about a monetary system, something that you could give that is worth money. This is still trading but instead it is trading goods for other goods this is trading goods for money. What happens when you decide to trade internationally? How can your tribe or country’s money compare to others’ worldwide? This is where the “Gold Standard” comes into effect.
Finally something that is worth the same everywhere will base how much your broken-down monetary system is worth. Today we have the Foreign Exchange which does trillions of dollars a day in monetary trading, but first let us start from the “Gold Standard” to learn how it started.
The “Gold Standard” is a way to trade internationally for goods and products. Let us say that $20 USD can buy 1 ounce of gold and 200 Yen can buy 1 ounce of gold. With this in mind 200 Yen is equal to $20 USD. That is a ten-to-one ratio and now we know that when buying a $1000 USD product from the United States the person paying in Yen would have to pay 10,000 Yen.
The “Gold Standard” was a great leap in the monetary system allowing trading between countries much easier. The downfall was that not all of the countries were using this system and had difficulty trading. The United States for one was on a bimetal system using gold and silver as their currency system and it was not until later that the United States shifted to a uni-metal system. That system would be the gold standard.
The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price. England adopted a de facto gold standard in 1717 after the master of the mint, Sir Isaac Newton, overvalued the silver guinea and formally adopted the gold standard in 1819.
How to Cite this Page
"Foreign Exchange Markets Now And Then." 123HelpMe.com. 20 Nov 2018
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- As Americans our nation has been protected from role of money as a commodity. Americans enjoyed a world where the dollar was the main currency of exchange and stability throughout the last half of the Twentieth Century. European citizens frequently travel to a next-door nation whose currency is entirely different than their own and where their own currency would not be accepted, and American’s travelling to Canada or Mexico could be fairly sure merchants would accept their Dollars. As the first decade of the 21st Century now draws to a close, on the other hand a shock may be in store for Americans.... [tags: American Dollar Currency Exchange Research Paper]
1196 words (3.4 pages)
- Foreign Exchange Market The foreign exchange market is one of the most important financial markets. It affects the relative price of goods between countries and so can affect trade. It means that it affects the price of imports and so affects a country’s price level (inflation rate). It also affects the international investment and financing decision. In this project, we will try to find why exchange rate would give many risks to a company and how a company can hedge itself. Definition of Exchange Rate The price of one currency expressed in terms of another currency is called an exchange rate.... [tags: Financial Markets Finance Business Essays]
1645 words (4.7 pages)
- ... In a market, there are buyers and there are sellers. This means that there is a supply and demand for the item being traded. The sellers may set a price that buyers are not willing to pay for. This will cause the sellers to have to drop the price in order to sell their item. This can be done without the item being present. On the markets, a broker who will represent Palmeri 3, the buyer or seller of these currencies, commodities, stocks, etc. does it. Trade has been and is a necessary function in today’s world and is growing as markets grow out of third world countries such as China has.... [tags: Foreign exchange market, United States dollar]
2296 words (6.6 pages)
- 1.0 Introduction to Foreign Exchange Market There is one thing that differentiates the international business with the domestic business where it uses more than one currency in the commercial transaction. For example, if a company from British purchases some goods from a company from US, the international transaction will require for exchanging pounds and U.S. dollars which involve the foreign exchange market. In the foreign exchange market, any country that wish to do business with foreign country, the country need to convert their domestic currency into the foreign currency that they are wish to cooperate with through foreign exchange.... [tags: international business]
1006 words (2.9 pages)
- The history of markets began two million years ago when barter of goods took place, these two sided negotiations provided evidence that our descendants practices primitive exchange. These activities were preparing ground for civilization, along with continuous developments which included different mediums for exchange such as money (Diamond, 1992). Markets are centralized, and an interacting point for sellers and buyers. The purpose of sellers in these open markets is to spend very small amount to advertise their products and the buyers intend to search for low cost commodities.... [tags: flea markets, barter goods, negotiations]
1176 words (3.4 pages)
- This paper will encompass the importance of the U.S stock market/stock exchange versus the Chinese stock market/ stock exchange, with a brief introduction about how each stock market/stock exchange came into existence, the importance of each stock market/stock exchange, how the U.S and Chinese manage their stock markets/stock exchange, how corporations are appointed plus the rules and regulations. This will also entail random facts about each stock market/stock exchange. Stock markets are like hitting a royal flush, if the price of your stocks goes up, you win; if it drops, you lose.... [tags: Stock market, Stock exchange, Stock]
2138 words (6.1 pages)
- How does the Foreign Exchange Market operate. The foreign exchange market, also known as forex, FX, or currency market is a global decentralized market for trading of currencies and operates on several levels, with the foreign Exchange market being the biggest financial market in the world, and the Australian foreign exchange market ranking seventh in the world. Australia has strong foreign trade links with Asia, United States, New Zealand, Western Europe and the Middle East countries. The foreign exchange market operates by assisting international trade and investment by enabling currency conversion, for example, by allowing a business in one country, to import goods from another country, u... [tags: trading of currencies]
1484 words (4.2 pages)
- Before the times of the foreign exchange market, the world depended on the gold standard to determine the value of goods and services. This paper will describe in more detail the gold standard, the positive and negative aspects of using the gold standard and in addition the paper will summarize the major functions of the world’s major foreign exchange markets. The gold standard was a monetary system that many countries used in order to determine the value of domestic currencies in relation to a specific amount of gold.... [tags: Economy Monetary Economics]
1216 words (3.5 pages)
- Economics for Business The Euro is the common currency of the European Monetary Union (EMU). The national currencies of the participating countries were replaced with Euro coins and bills on January 1, 2002. The countries that participate in the Euro Monetary Union (EMU) are Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, and Finland (http://europa.eu.int/eoro/entry.html). These countries irrevocably established the conversion rates between their respective national currencies and the euro and created a monetary union with a single currency, giving birth to the euro.... [tags: Economics]
1820 words (5.2 pages)
- Importance of Strategic Planning when Entering International Markets When a company decides to take their business international, there are many different factors that they need to take into account. There are differences in management styles, international laws and treaties that regulate international business, trade barriers, tariffs, taxes, exchange rates as well as cultural customs that come into play. Each of these is significant and needs to be taken into account in order to minimize potential problems.... [tags: Business Foreign Markets]
2251 words (6.4 pages)
Let us move on to the Foreign Exchange Market or FOREX. This is the current system used to exchange trillions of dollars every day. It is open 24 hours a day and is the “world’s largest and most liquid market in the world.” (Structure of the foreign ¶1) You ask what is the advantage of the Foreign Exchange Market. Constant change of currencies for banks and investors. In today’s world we are working around the clock to keep up with business, especially since the implementation of the internet. Now investors can use the FOREX for their personal investments. There is an exchange rate between the domestic currency and every other currency in the world.
There are five major trading centers associated with the FOREX: New York, Singapore, Hong Kong, London, and Tokyo. These major trading centers cover most of the time zones in the world and are constantly trading. The most traded currency is the US Dollar. Looking at the chart below this is how the other currencies of the world rank in traded currencies.
As you can see the US Dollar is by far the most traded currency in the world followed by the Euro, Japanese Yen and the Great Britain Pound. By trading the major currencies of the world we can operate more efficiently and in today’s world we need to operate as fast and as efficient as possible to keep up with the demands.
A few years ago, foreign exchange trading was limited to banks and other large financial institutions. Now in this electronic age, any person can perform online trading with a personal computer and the Internet. Almost all banks, hedge funds, pensions, and mutual funds are involved in foreign exchange trading. Money can earned regardless if a currency is gaining or losing its value. (FOREX VEDA ¶2)
There are four main trading pairs that the FOREX uses. These currencies are: USD-Yen, Euro-USD, European Pound-USD, and Swiss Franc-USD. Why is this important you ask? These are the main currencies of the world. The USD is the most traded monetary fund traded and therefore each kind of money is traded with it and then broken down farther from there.
We have gone over the Gold Standard and how it led to the foreign exchange market rise to the point it is now. Trading trillions of dollars everyday, open 24 hours a day to make our lives and our international trading much more easily. Imagine trying to trade an IPOD from Japan for a tire in today’s world. That might make it a little difficult when doing this to millions of trades per day. On top of things being bought there is billions and billions of dollars being used for investment purposes with bonds and stocks. By having the Foreign Exchange Market our lives can be ran just as simple as we know. But when you start to break down how this foreign exchange market works things become more apparent on how hard people work behind the scenes to make our lives as simple as possible.
Bordo, Michael D. (n.d.) Gold Standard. Retrieved on May 22, 2008 from http://econlib.org/library/enc/goldstandard.html
Structure of the Foreign Exchange Market. (n.d.) The Foreign Exchange Market of the United States. Retrieved on March 22, 2008 from http://www.newyorkfed.org/education/addpub /usfxm/chap3.pdf
The Foreign Exchange Market.(n.d) FXTrade. Retrieved on May 23, 2008 from http://fxtrade.oanda.com/learn/what_is_forex/currency_exchange_market.shtml
Welcome to FOREX.(n.d) Forex Veda. Retrieved on May 23, 2008 from http://www.forexveda.com/