Foreign Exchange Markets Summary

Essay by roxy_snow21College, UndergraduateA, November 2010

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Money, Currency, Exchange, and Trade � PAGE �1�

Money, Currency, Exchange, and Trade:

Gold Standard to Floating Rates


Money may make the world go around, but foreign exchange markets allow money to go around the world. International travel, studies, and business could not take place unless people had a way to assure they could securely enter into agreements to buy or sell whatever they wanted. A nation's currency must be able to be traded and accepted by international banks, businesses, and people in order for the world's nations to take part in international commerce. Foreign exchange markets and their players are the ones who assure international trade can occur.

Money, Currency, Exchange, and Trade: Gold Standard to Floating Rates

We have all heard that money makes the world go around. As Americans, however, our nation has been relatively protected from role of money as a commodity. Americans enjoyed a world where the U.S. Dollar was the main currency of exchange and stability throughout the last half of the Twentieth Century.

Unlike Europe, where citizens frequently travelled to a next-door nation whose currency was entirely different than their own and where their own currency would not be accepted, American's travelling to Canada or Mexico could be fairly sure merchants would accept their Dollars. As the first decade of the Twenty-first Century now draws to a close, however, a shock may be in store for Americans. The U.S. Dollar may no longer be the main currency of exchange in the world and may no longer be such a desired currency to hold.

How and why a currency increases or decreases in value, the effects of such changes, and the resulting effects on a nation and the world are very important matters to consider. Money, although often thought of as only a...