The History of Forex: When Trading Started and How the Market Evolved

First published: 19 December 2018 · Reviewed and updated: 21 September 2026

Forex is the largest market on earth — $9.6 trillion changes hands every day — and yet in its modern form it is younger than the pocket calculator. It exists because a fixed-rate system broke down in the early 1970s, and almost everything that moves currency pairs today follows directly from that break.

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1. When did forex trading start?

The modern forex market started between August 1971 and March 1973. That is the answer to the question as traders mean it: a market in which exchange rates are set by supply and demand rather than by an official peg.

The sequence was short and decisive. On 15 August 1971, after three days of meetings at Camp David, President Richard Nixon announced that foreign governments could no longer exchange dollars for gold. The Smithsonian Agreement of December 1971 tried to hold the fixed-rate system together by devaluing the dollar to $38 an ounce and widening the permitted trading bands to ±2.25%. It did not hold. By March 1973 the major currencies were floating, and they have floated ever since.

Currency exchange, of course, is much older. But there is a clean distinction worth holding on to:

• Currency exchange — swapping one money for another — is roughly 2,600 years old.
• The forex market — a continuous market where the exchange rate itself is the traded price — is about 53 years old.

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2. Before the modern market: coins to the gold standard

Coinage and the money changers

Standardised coins first appear in Lydia, in western Anatolia, in the sixth century BC. Once coins carried a known weight and purity, exchanging one city’s money for another’s became a trade in its own right, and the money changer became a recognised profession across the ancient and medieval world. The Italian banking houses of the Renaissance turned it into a business with branches, credit and settlement — the word bank comes from the banca, the bench on which a Florentine money changer worked.

A note on the “6000 BC barter” claim you will see repeated on many trading sites: the idea that a pure barter economy preceded money is a textbook simplification that economic historians now treat with scepticism. Early record-keeping societies used units of account and credit long before coinage. It makes a neat story, but it is not the part of forex history that stands up to scrutiny.

The gold standard, 1800s to 1914

The gold standard was the first genuinely global exchange-rate system. Britain formalised it in 1819 and the United States followed in 1834; by the 1870s most major economies had joined. Each currency was redeemable for a fixed weight of gold, which meant every currency was fixed against every other one. Exchange rates moved only within narrow “gold points” — the band inside which shipping physical gold was cheaper than trading the currency.

The system was suspended when the First World War made gold convertibility impossible, restored uneasily in the 1920s, and destroyed by the Depression and the Second World War. Its lesson has repeated in every fixed-rate system since: a peg holds only while the country can defend it, and markets test the ones that cannot.

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3. Bretton Woods, 1944–1971

In July 1944, with the war still running, delegates from 44 nations met at the Mount Washington Hotel in Bretton Woods, New Hampshire, to design the post-war monetary order. The result fixed the US dollar to gold at $35 an ounce and pegged every other participating currency to the dollar within a 1% band. The conference also created the International Monetary Fund and the institution that became the World Bank.

The design had one consequence that still shapes every currency pair you trade: it made the US dollar the world’s reserve currency. Eight decades later the dollar is still on one side of 89.2% of all forex trades.

It also had a flaw. The United States had to supply the world with dollars while holding enough gold to redeem them. By the late 1960s it could not do both. Foreign governments, increasingly doubtful, began converting dollars into gold — and the arithmetic ran out.

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4. The Nixon Shock and the birth of the free float

Nixon’s announcement on 15 August 1971 had three parts: closing the gold window, a 90-day freeze on wages and prices, and a 10% surcharge on imports. Only the first mattered for currencies, and it mattered completely. The international monetary system became a fiat one overnight.

After the Smithsonian patch failed, the major currencies floated from March 1973. Three things followed immediately, and all three still define how forex works:

1. Exchange rates became prices. They now move continuously, and they can be traded.
2. Interest-rate differentials became the main driver. With no gold anchor, capital flows to the better yield — the modern equivalent of the old gold points.
3. Central banks became the most important market participants. Not because they trade the most, but because they set the rates everything else prices off.

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5. The Plaza Accord, 1985

By 1985 the dollar had risen so far that American exporters were in trouble. On 22 September 1985, finance ministers of the G5 — the United States, the United Kingdom, France, West Germany and Japan — met at the Plaza Hotel in New York and agreed to act together to push it down. The dollar fell sharply over the next two years, so sharply that the Louvre Accord of February 1987 was convened to stop the slide.

Why it still matters: Plaza is the cleanest proof in market history that coordinated intervention by major central banks can set the direction of a multi-year currency trend. Positioning does not beat a policy consensus. Traders who were short the yen into September 1985 learned this the expensive way.

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6. Black Wednesday, 1992

On 16 September 1992 the United Kingdom was forced out of the European Exchange Rate Mechanism. The Bank of England raised interest rates twice in a single day and spent heavily defending sterling’s peg, and by the evening had abandoned both the rate rises and the peg.

Why it still matters: Black Wednesday is the same lesson as the gold standard, delivered in a single session. A peg that is economically unsustainable will be tested, and the defence — higher rates, reserve spending — is itself the signal that it is in trouble. The pattern repeated with the Swiss National Bank’s abandoned euro floor in January 2015, which moved EUR/CHF by roughly 30% in minutes.

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7. The euro, 1992–2002

The Maastricht Treaty of 1992 set the path to a single European currency. The euro launched on 1 January 1999 as an accounting currency for eleven countries, with notes and coins following on 1 January 2002. It instantly became the second reserve currency and the other half of the most traded pair in the world.

The euro’s share has been slipping, though: it appeared on 28.9% of trades in April 2025, down from 30.6% three years earlier.

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8. When did online forex trading start?

Online forex trading started in 1996. That was the year the first internet-based retail platforms appeared and OANDA, founded the same year, began publishing exchange rates free on the web — information that had previously been the property of banks.

The electronic market itself was older, but it was closed. Dealers moved from telephone and telex to the Reuters Monitor Dealing Service in 1981, and EBS, launched in 1993, gave the interbank market a proper electronic broker. Neither was open to anyone outside a bank.

The retail era then arrived in three steps:

This is the single biggest structural change since 1973: the free float created the market, and the internet opened it.

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9. Forex history timeline

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10. The market today, in numbers

Every figure in this section comes from the BIS Triennial Central Bank Survey, the three-yearly census of the market that central banks have run each April since 1989. The 2025 results were published on 30 September 2025.

Who is on the other side of the trade

Because every trade involves two currencies, the shares below add up to 200%, not 100%. The dollar’s dominance is the direct inheritance of Bretton Woods; the renminbi’s climb is the fastest structural shift since the euro was created.

Most of the market is not what retail traders do

This is the number that surprises people. The headline $9.6 trillion is not $9.6 trillion of directional speculation — spot trading is only 31% of it. The largest instrument is the FX swap, at about $4 trillion a day, which banks and corporates use to fund and hedge positions rather than to bet on direction.

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11. Which forex market opens first?

This question comes up constantly alongside the history ones, and it is about the daily cycle rather than the past. Because forex has no central exchange, it runs continuously from Monday morning in Asia to Friday evening in New York. The session order is:

1. Sydney — opens the week first
2. Tokyo — the main Asian session
3. London — the largest single centre, roughly 38% of global turnover
4. New York — closes the week

The busiest hours are the London–New York overlap, when the two largest centres are open at once. This 24-hour structure is itself a consequence of the free float: under Bretton Woods there was no reason to trade a rate that was not allowed to move.

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12. Who created forex?

There is no founder. Searching for one is the wrong shape of question, because the market is a by-product of policy rather than a product someone launched. The people who mattered most:

The retail market has no founder either. It came from software: the first web platforms of 1996 and the trading terminals that followed.

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13. Currency systems compared

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14. What history teaches, 2024–2026

History is only useful if it improves decisions. The last three years have replayed several of the patterns above, with the four major central banks all tightening at once by September 2026.

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15. Central bank decision checklist

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16. Frequently asked questions

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17. Sources