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Trends & Analysis
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Crude oil spikes on US inventories report

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Does Apple have more room to run?

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Gold spikes to new highs on Fed remarks

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GBP/USD price may correct lower

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Goldman Sachs’ stock surges on upbeat Q2

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Caution ahead of Netflix’s earnings?

Trends & Analysis
News

Crude oil spikes on US inventories report

News

Does Apple have more room to run?

News

Gold spikes to new highs on Fed remarks

News

GBP/USD price may correct lower

News

Goldman Sachs’ stock surges on upbeat Q2

News

Caution ahead of Netflix’s earnings?

Bretton Woods definition

The Bretton Woods Agreement was a monetary system designed to promote international economic stability and facilitate trade by fixing the exchange rates between major currencies and the US dollar, which was pegged to the price of gold.

The agreement was established in 1944 at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, in the United States. The aim was to create economic stability after World War II. It remained in effect until 1971, when the US suspended the convertibility of dollars into gold. This led to collapse of the fixed exchange rate system and a shift towards the current system of floating exchange rates.

 

How did the Bretton Woods Agreement work?

This agreement was undertaken by 44 UN member countries who agreed to tie their currencies to the US dollar. The countries included Canada, the United Kingdom, France. Under this system, the value of these currencies would remain within a narrow range of fluctuations against the US dollar by buying or selling foreign currencies in the foreign exchange market as needed. At the time, the US dollar itself was pegged to the price of gold at $35 per ounce.

The aim of Bretton Woods was to create a stable global financial system by preventing competitive currency devaluations. This would in turn promote international trade and investment.

 

Why did the Bretton Woods Agreement end?

The Bretton Woods Agreement ended when the US government could no longer maintain the exchange rate of the US dollar to the price of gold. In 1971, US President Richard Nixon announced that the US would no longer convert dollars into gold, effectively ending the system. Currencies then began to float freely against each other, with their values determined by various market forces.

 

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