The U.S. Dollar’s exchange rate, as expressed on any US Dollar exchange rate history chart, will only tell the story of how the dollar has performed against another specific currency. FOREX trades are made strictly in pairs, as one country’s currency versus another. How the U.S. Dollar performs against the Euro Dollar may be totally different than its price relationship to, say, the Japanese Yen.
As the most traded currency in the world, the dollar (U.S.) is a part of every major trade made in FOREX, or the foreign exchange market. Its coupling with the Euro Dollar is, in fact, the most common trade on the board. An investor making this bet is either buying the Euro (EUR) and selling the US Dollar (USD) in a long position or selling the Euro and buying the USD if he is going short.
Back in July, 1944, at the height of the Second World War, 730 representatives from all the 44 Allied nations met at a hotel in New Hampshire for the United Nations Monetary and Financial Conference. Obviously, delegates from Germany and Japan were not in attendance, since those countries were not part of the Allied group. It was during this conference that the IMF (International Monetary Fund) was created and a system which became known as the Bretton Woods System was put into operation.
Looking at a US Dollar exchange rate history chart from that time shows the dollar to be the strongest world currency, but the war was very expensive. This system was meant to establish rules for international monetary policy and for the financial relations between member countries and their individual currencies. These rules obligated countries signing the accord to adopt financial and monetary policies that would keep the exchange rates of their respective currencies within a certain range as they related to the current value of gold.
When 1971 saw the U.S. Going off the gold standard, however, and in unilateral fashion, this all changed. Dollars were no longer convertible into gold or pegged to gold’s value. The U.S. could now print as much money as it desired! According to some experts, this was the beginning of the end of world financial stability.
The value of a currency now is said to ‘float’. It is more up to market sentiment and speculation these days, what any currency is actually worth compared to another. Political news now often move a currency’s relative value significantly.
All major trades in FOREX include the U. S. Dollar being traded against another major currency. These include The Swiss Franc, the British Pound and the Euro, Canadian and Australian Dollars. If a US Dollar exchange rate history chart is to provide a true representation of actual dollar strength or weakness, it should show the relationship of the USD against all of these other major currencies simultaneously.
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