HOW THE GLOBAL ENVIRONMENT HAS CHANGED

Since the early 1970s, with increasing
internationalization of financial transactions,
the foreign exchange market has been
profoundly transformed, not only in size, but
in coverage, architecture, and mode of
operation. That transformation is the result of
structural shifts in the world economy and in
the international financial system. Among
the major developments that have occurred
in the global financial environment are the

following:

A basic change in the international monetary

system, from the fixed exchange rate “par
value” requirements of Bretton Woods that
existed until the early 1970s to the flexible
legal structure of today, in which nations can
choose to float their exchange rates or to
follow other exchange rate regimes and
practices of their choice.
w A tidal wave of financial deregulation
throughout the world, with massive elimination
of government controls and restrictions

in nearly all countries, resulting in greater
freedom for national and international
financial transactions, and in greatly increased
competition among financial institutions, both
within and across national borders.


A fundamental move toward institutionalization
and internationalization of
savings and investment

with funds managers
and institutions around the globe having
vastly larger sums available, which they are
investing and diversifying across borders
and currencies in novel ways and in ever
larger amounts as they seek to maximize
returns.


A broadening and deepening trend toward
international trade liberalization, within a
framework of multilateral trade agreements,
such as the Tokyo and the Uruguay Rounds of
the General Agreement on Tariffs and Trade,
the North American Free Trade Agreement,
and U.S. bilateral trade initiatives with China,
Japan, and the European Union.