Up until World War II, the British pound was the dominant world currency, and the one against which most other currencies were compared. The British pound's day as the world's benchmark currency was eroded by Nazi Germany, which launched a massive counterfeiting campaign in World War II which saw confidence in the pound shrink.

Meanwhile, the U.S. dollar, which had lain in disrepute since the market crash of 1929, emerged from World War II as the currency of choice. The U.S. economy was booming, and the United States emerged as a world economic power. Moreover, it was one of the few countries that hadn't felt the trauma of war on its own shores, so its massive infrastructure was intact. The U.S. dollar was now the world's benchmark currency, and it became the currency against which other nations would measure their own currencies as they struggled to rebuild themselves.

So in 1944 at the end of World War II, an agreement was signed with representatives from the United States, Great Britain and France, which pegged currencies against the U.S. dollar in order to stabilize the global economy. This is known as the Bretton Woods agreement, and the keeper of this rule book was established in the form of the International Monetary Fund (IMF).

The first element of the Bretton Woods Accord was to peg the U.S. dollar to the price of gold at $35.00 an ounce, using the Gold Standard, and then fixing the other remaining currencies to the dollar. The 'gold standard' used the physical weight of gold as the standard value for the money and making it directly exchangeable in the form of the precious metal. The Bretton Woods system formalized the role of the US dollar as the new 'global' reserve currency with its value fixed into gold. The U.S. assumed the responsibility of ensuring convertibility while other currencies were pegged to the dollar.

Eventually Bretton Woods collapsed in the early 1970's following President Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suited as the sole international currency when it was under severe pressure from increasing US budget and trade deficits.
Up until its failure in 1971, the Bretton-Woods Accord did manage to stabilize the economies in Europe and Japan.