This document discusses the evolution of exchange rate systems over the past 100 years. It describes several major international monetary systems: bimetallism before 1875 when currencies were pegged to gold and silver; the classical gold standard from 1875-1914 when currencies were pegged only to gold; the interwar period from 1915-1944 when currency fluctuations were wide; the Bretton Woods system from 1945-1972 when the US dollar was pegged to gold; and the flexible exchange rate regime since 1973 when currencies floated freely against each other. The document provides details on the key features of each system and how they shaped international exchange rates over time.

1. Evolution of
Exchange Rates
Past 100 years
Dr V. B. Angadi
BUSINESS ENVIRONMENT

2. Group Members-
 125 – Manvi Saigal
 126 – Shreya Sanghani
 127 – Parth Sangoi
 137 – Siddharth Shah
 153 – Prathamesh Shitut
 157 – Col Paramjeet Singh
 170 – Lekha Trivedi
 177 – Maisam Virani
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3. What are Foreign Exchange Rates?
 An exchange rate (also known as a foreign-
exchange rate, forex rate, FX rate) between
two currencies is the rate at which one currency
will be exchanged for another. It is also regarded as
the value of one country’s currency in terms of
another currency.
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4. Why Are Exchange Rates Important?
 When the currency of our country appreciates
relative to another country, our country’s goods
prices increase abroad and foreign goods prices
decrease in our country.
 Makes domestic businesses less competitive.
 Benefits domestic consumers .
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5. International Monetary Systems
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6. Evolution of Monetary Systems
 Bimetallism: 1870-1875
 Classical Gold Standard: 1875-1914
 Interwar Period: 1915-1944
 Bretton Woods System: 1945-1972
 The Flexible Exchange Rate Regime: 1973-Present
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7. Bimetallism (Before 1875)
 A “double standard”: both gold and silver were used
as money, accepted as means of payment.
 Some countries were on the gold standard, some on
the silver standard, some on both.
 Exchange rates among currencies were determined
by either their gold or silver contents.
 Bimetallism was intended to increase the supply of
money, stabilize prices, and facilitate setting
exchange rates.
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8. Classical Gold Standard (1875-1914)
 During this period in most major countries:
 Gold alone was assured of unrestricted coinage
 There was two-way convertibility between gold
and national currencies at a stable ratio.
 Gold could be freely exported or imported.
 Many country set a par value for its currency in
terms of Gold and tried to maintain it.
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9. Interwar Period (1915-1944)
 Only U.S. and Britain allowed to hold gold
reserves.
 Other countries could hold both gold, dollars or
pound reserves.
 During World war I: currencies fluctuate over wide
ranges to gold.
 Due to Supply & Demand for imports/exports.
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10. Bretton Woods System (1945-1972)
 Named for a 1944 meeting of 44 nations at Bretton
Woods, New Hampshire.
 The purpose was to design a postwar international
monetary system.
 The goal was exchange rate stability without the
gold standard.
 The result was the creation of the IMF and the
World Bank.
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11. Bretton Woods (1945-1971)
 U.S. dollar was pegged to gold at $35 per ounce and
other currencies were pegged to the U.S. dollar.
 Each country was responsible for maintaining its
exchange rate within ±1% of the adopted par value
by buying or selling foreign reserves as necessary.
 The Bretton Woods system was a dollar- based gold
exchange standard.
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12. Flexible Exchange Rate: 1973-Present
 Flexible exchange rates were declared acceptable to
the IMF members.
 Central banks were allowed to intervene in the
exchange rate markets to iron out unwarranted
volatilities.
 Gold was abandoned as an international reserve
asset.
 Non-oil-exporting countries and less- developed
countries were given greater access to IMF funds
and World Bank.
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13. Current Exchange Rates
 Free Float
 The largest number of countries, about 48, allow
market forces to determine their currency’s value.
 Managed Float
 About 25 countries combine government
intervention with market forces to set exchange
rates.
 Pegged to another currency
 Such as the U.S. dollar or euro.
 No national currency
 Some countries do not bother printing their own,
they just use the U.S. dollar.
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14. THANK YOU