The History of Forex: From Gold Coins to $9.6 Trillion a Day

The foreign exchange market as traders know it began in the early 1970s, when the US stopped exchanging dollars for gold and the major currencies started to float against each other. Before that, for most of modern history, exchange rates were fixed by tying currencies to gold, and later to the dollar.

Today the market turns over about $9.6 trillion a day, according to the Bank for International Settlements' 2025 survey, which makes it by far the largest financial market in the world.

Knowing how the system evolved helps you understand why central banks matter so much, why the dollar sits on one side of most trades, and why prices can jump when a policy suddenly changes.

Money changers and the first exchange rates

Exchanging one form of money for another is as old as trade between cities. Ancient merchants weighed coins of gold and silver, and money changers set up at markets and temples to swap one city's coins for another's, charging a fee for the service. In medieval Europe, Italian banking families such as the Medici used bills of exchange so merchants could settle debts in other countries without moving chests of coins across dangerous roads.

These early markets already had the basic features of modern forex: two prices for buying and selling, a margin for the dealer, and rates that moved with supply and demand. What they lacked was a common anchor.

The gold standard, 1821 to 1914

Britain formally adopted the gold standard in 1821, promising to swap banknotes for a fixed amount of gold. Other countries followed during the 19th century, and the United States put it into law with the Gold Standard Act of 1900. When two currencies are each worth a fixed weight of gold, the rate between them is fixed too, so exchange rates barely moved.

The system broke down in the First World War. Governments needed to print money to pay for the fighting and suspended gold convertibility. Attempts to restore it in the 1920s were short-lived, and the Great Depression of the 1930s pushed country after country off gold for good.

Bretton Woods, 1944 to 1971

In July 1944 delegates from 44 allied nations met at Bretton Woods, New Hampshire, to design a post-war system. The US dollar was fixed to gold at $35 an ounce, and other currencies were pegged to the dollar within narrow bands, and the International Monetary Fund and the World Bank were created at the same conference.

The arrangement gave the world 25 years of stable exchange rates, but it depended on the US holding enough gold to back the dollars circulating abroad. By the late 1960s it did not. Our full guide to the Bretton Woods system explains how it worked and why it strained.

1971: the floating era begins

On 15 August 1971 President Nixon suspended the dollar's convertibility into gold, an event known as the Nixon Shock. A rescue deal, the Smithsonian Agreement, set new fixed rates in December 1971, but it lasted little more than a year. By March 1973 the major currencies were floating, with prices set by supply and demand rather than by governments.

That was the birth of the modern market. Banks began trading currencies for profit as well as for clients, central banks started intervening only occasionally, and the volume of trading began a climb that has never really stopped.

Agreements, crises and the euro

Floating did not mean governments stopped caring. In 1985 the Plaza Accord saw five major economies agree to push the dollar down, and the 1987 Louvre Accord tried to stop its fall. Crises taught hard lessons: the collapse of Germany's Herstatt Bank in 1974 exposed settlement risk, Black Wednesday in 1992 showed that pegs can break, and the 1997 Asian crisis showed how quickly money can leave a country.

In 1999 eleven European countries launched the euro, merging some of the most traded currencies into one. Three years later, in 2002, the CLS settlement system went live, letting banks settle both sides of a currency trade at the same moment and cutting the risk that sank Herstatt.

Retail trading and the online era

Until the late 1990s forex was a market for banks, funds and large companies. The internet changed that. Online brokers began offering individuals small accounts with leverage, and in 2005 MetaQuotes released MetaTrader 4, which became the standard platform for retail traders worldwide. Smartphones then put the market in everyone's pocket.

Growth since then has been striking. This chart shows daily turnover from the BIS surveys, which are taken every three years.

Retail traders are a small share of that total; most volume is between banks, funds and corporations. Regulators have also tightened the rules for individuals, capping leverage in Europe, the UK, Japan and elsewhere because most retail accounts lose money.

Who trades forex today

Modern forex is a network of dealers rather than a single exchange. At its core sit the large banks that make prices to each other and to clients. Around them are hedge funds and asset managers moving money between countries, companies paying for imports or bringing profits home, central banks managing reserves, and electronic market makers that quote prices in milliseconds.

Retail traders reach this network through brokers, who either pass orders on to liquidity providers or take the other side themselves. That structure explains why your spread widens at quiet times and around news: the prices you see depend on what the banks behind your broker are willing to quote at that moment.

What the history means for you

• Central banks still drive the market. From gold to Bretton Woods to today's interest rate decisions, policy is the biggest force behind currency moves.
• The dollar is still the hub. In 2025 the BIS found it on one side of 89% of trades.
• Regime changes cause the biggest gaps. When a fixed rate breaks, prices can jump past stops in seconds.
• The market never sleeps. Trading moves from Sydney to Tokyo, London and New York, five days a week.

Frequently asked

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• Forex market sessions
• The major currency pairs
• What is forex trading?