History of Exchange Rate

Abstract

In finance, an exchange rate or a foreign exchange rate or a forex rate or an FX rate (i.e., e _t ($/€)) between two currencies is the rate at which one currency will be exchanged for another. Exchange rate is the price (value) of one country’s currency in terms of another country’s currency. The history of money goes back thousands of years. Numismatics is the scientific study of moneys and their history in all their varied forms and functions. Many items have been used as commodity money, such as animals, barley, wine, oil, cowrie shells, beads, and naturally occuring rare precious metals and stones, as well as many other things that be considered as valuable to the average person. Most ancient moneys started to become tokens a long time ago. The word “nomisma”¹ (derived from nomos = anything assigned, a usage, a custom, a law, an ordinance), meaning coin, was and still is used by Greeks for “currency” and “money.” Historically, the island of Aegina (Greece) participated in the early days of coinage (silver coins since 670 B.C.), the first money in Europe. Then, coins were minted in Athens, Corinth, Euboea, Syracuse, and in other Greek city-states and their colonies. Hence, objects of gold or silver or copper present many of money’s essential properties. Modern money appeared in paper currency form (banknotes) as early as the Ptolemaic Egypt (first century BC), and in Europe during the fourteenth century AD, and as coins much earlier. The industrial revolution, the independence of European nations, the economic boom, and the increase in trade of the late nineteenth and early twentieth centuries led us to a need for a more formalized system of payments and settling international trade balances.