A significant
role belonged to the increased volatility of currencies rates, growing mutual influence of different
economies on bank-rates established by central  banks, which affect essentially currencies
exchange rates, more intense competition on goods markets and, at the same time, amalgamation
of the corporations of different countries, technological revolution in the sphere of the currencies
trading. The latter exposed in the development of automated dealing systems and the transition to
the currency trading by  means of the Internet.  In addition to  the dealing systems,  matching
systems simultaneously connect all traders  around the world, electronically duplicating the
brokers'  market. Advances in technology, computer software, and telecommunications and
increased experience have increased the level of  traders'  sophistication, their ability to  both
generate profits and properly handle the exchange risks. Therefore, trading sophistication led
toward volume increase.

 
Regional reserve countries. Along with the global reserve currency - U.S. dollar, there are also
other regional and international reserve countries. In 1978, the nine members  of the European
Community ratified a plan for the creation of the European Monetary System managed by  the
European Fund of the Monetary Cooperation. By  1999 these countries, which constituted so-
called Euro zone, have implemented the transition to the common European currency - the euro
(see Figure 1.1). 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.
 
The euro is a regional reserve currency for the euro zone countries and the Japanese yen - for the
countries of  Southeast Asia. The portfolio of  reserve currencies may change depending on
specific international conditions, to include the Swiss franc.  

                                                                                                                                                                
The role of the U.S. Federal Reserve System and Central banks of other G-7 countries on
Forex. All central banks and the U.S. Federal Reserve System (FRS) as well, affect the foreign
exchange  markets  changing discount rates and  performing the  monetary operations (as
interventions and currency purchases). 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 national currency should weaken.