A short history about the origin and development of the currency exchange market. 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  periods of high volatility (that  is  a
frequency and amplitude of price alteration) and relative stability formed itself in the twentieth
century. By  the mid-1930s London became 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". 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, in accordance with the Breton
Woods Accord between the USA, Great Britain and France (1944) became the reserve currency
for all the capitalist countries and all currencies were pegged to the American dollar (through the
constitution  of currency ranges maintained by central banks of relevant countries by means of
interventions or currency purchases). 
 
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. In accordance with the same agreement was organized the International
Monetary Fund (IMF) rendering now a significant financial support to the developing and former
socialist countries effecting economical transformation. To execute these goals the IMF uses such
instruments as Reserve trenches, which allows a member to draw on its own reserve asset quota at
the time of payment, Credit trenches drawings  and  stand-by arrangements. The letters are the
standard form of IMF loans unlike  of those as 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. 
 
At the end of the 70-s the free-floating of currencies was officially mandated that became the
most important landmark  in the history  of financial  markets in the XX century lead to  the
formation of Forex in the  contemporary understanding. 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.  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.