Historic Exchange Rates
An exchange rate, foreign exchange rate, Forex rate, or FX rate is the rate one currency is exchanged for another. It is also considered to be the value of one country's currency in terms of another currency. For example, on a given day of Forex trading the currency exchange rate of one US dollar (US$1) is equal to 0.67 Euro (€0.67).
Exchange rates are determined in the Forex or FX global currency exchange market, which is specifically used for trading currencies. The Forex/FX is similar to, but larger and differently structured than, the NYSE. Its primary purpose is to establish currency values (currency exchange rate) and convert foreign currencies for the convenience of global traders and investors. Its high-risk, 24-hour-availability, and short-term trades have become popular with day-traders as well.
The Bretton Woods monetary management system was created at the end of WWII in an effort to stabilize the global economies of Western Europe and industrialized nations. This involved establishing a fixed rate exchange regime that related one primary currency, such as the US dollar, with another. This single system continued until 1967 when countries began to increasingly use floating exchange rates in their transactions, where the currency market controls exchange rate activities. The floating rate currency market we use today has been in use since 1970.
Many Forex traders liquidate their currency positions for more stable, safe-haven currencies like the US dollar, considered one of three primary reserve currencies. A reserve currency is one that global governments choose to maintain in significant quantities due to its low-fluctuation rate. For example, even during the 2008 Financial Crisis, the US dollar still gained strength. Other reserve currencies are the euro (EUR) and pound sterling (GBP).
Exchange rates are directly related to trade and a country's economic health. Foreign currencies become more valuable when the demand becomes greater than available supplies. Increased demand may be a result of a country's level of business activity, GDP, employment levels, or interest rate increase.
Cross-border Forex trading has exceeded currency transactions from trading goods and services, based on economic variables. Countries have manipulated their currency-value as a means to stabilize their economies and boost their global trade advantage. Japan experienced a long deflationary period between 1989 and 2003. The Japanese central bank finally intervened in the YEN/USD currency markets by "printing" over 35 trillion Yen of currency that was then used to purchase 320 billion stable, safe-haven US dollars, which were then invested in US treasuries. The devaluing of the yen against the US dollar improved Japan's exports, ended its deflationary period, and lifted the US out of the 2001-2003 recession (maintaining low interest rates although trade and government deficits continued to increase).
The Federal Reserve (est. 1913), responsible for maintaining the value of the US dollar and price stability, reversed inflation caused by the WWI and stabilized the US dollar during the 1920s. There was a 30% deflation in US prices in the 1930s however. After WWII, and under the Bretton Woods system, the US dollar was tied to gold value. Rising government costs in the 1960s, gold stocks shortage, and international conversions of US dollars to gold caused the US dollar value to fall. The US dollar ceased being fixed to gold but the Federal Reserve continued increasing the money supply, devaluing the US dollar further. The US dollar lost 2/3 of its value between 1965 and 1981, and another half of its value between 1981 and 2009. Despite historical declines, the US maintains that a strong US dollar exchange rate is in the best interest of the US and the world, and encourages foreign bondholders to buy more Treasury securities, which minimizes inflation and encourages foreign investment.
In 2010, in an effort to stabilize their economies, Brazil and Japan both subsidized cheap exports by devaluing their currencies.
The Peoples Republic of China successfully kept the value of their currency low until 2005 when the Yuan appreciated 22% and Chinese imports to the US increased 38.7%. Currently the Chinese central bank manipulates the exchange rates by creating Yuan and buying US debt. By keeping its Chinese currency artificially weak China generates a dollar surplus. The Chinese government has to buy up the excess dollars as a result.
Historically, the least valued currencies have included the Portuguese real (1911) to the Somali shilling (2009). There were forty-two currencies for which one US dollar was worth over 100 units as of January 23, 2011. The South Korean won is the least valued currency of any OECD (Organisation for Economic Co-operation and Development) state. Redenominations of Iran, Paraguay, Colombia, and Iraq currencies are being reviewed (2011). The Somaliland shilling - Somaliland Central Bank - has no official exchange rate and Zimbabwe's dollar and exchange rate was indefinitely suspended on April 12, 2009.
Professional advice should be sought regarding all financial services. These can be obtained from financial advisors and planners who can also advise on financing, loans, accountancy and tax related matters.