In a typical foreign exchange transaction, a party purchases some
quantity of one currency by paying some quantity of another currency.
The modern foreign exchange market began forming during the 1970s after
three decades of government restrictions on foreign exchange
transactions (the Bretton Woods system of monetary management
established the rules for commercial and financial relations among the
world's major industrial states after World War II), when countries
gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.