The impact of war on the forex market
How do markets respond to war and geopolitics؟ in the first part of the article, we discuss how war can affect the forex market. If we want to be more precise, it is not only the numbers that make the roofs and floors. It’s the patterns. Rather, news and events that happen in the world, such as war special the Russia-Ukraine war, epidemics, etc., can overshadow the movement of the market. Investigating news and influential events is called fundamental analysis. The impact of war on the forex can have consequences, including currency depreciation.
Of course, from the economic and fundamentalist point of view, it makes sense to know what is important the mentality of people. and the next decisions and opts that are made through it.
The impact of war on the forex and to how the extent news data and events information can be accessed faster. Before the effects affect the economy and society around it. Analyzed, and evaluate the impact of the war on forex with the available facilities and made decisions for prevention.
Some experts believe that the impact of the war on forex may not show itself in the short term. On the other hand, investors say that the recent wars have not had that much impact on the stock and currency markets. The costs related to the war can have effects that lead to the reduction of the US GDP.
It is not wrong to mention the mystery of war here! As a result, as the possibility of war becomes more intense, the stock price decreases. And the opposite is when the war starts and the stock price increases.
The impact of the Ukraine war on the forex market
In the continuation of the study of the impact of the Ukraine war on forex, we will study such things. As the devaluation of the currency of countries and the currency war. Let’s see what is the concept of devaluation of money.
This concept includes making decisions to strategically reduce the purchasing power of a country’s money.
It is a strategy that countries pursue to gain a competitive advantage in international trade and reduce their debt burden. But if we want to examine it in terms of the impact of war on the forex, it must be said that war strongly affects the economy of a country.
Also, the trade balance of a country will face a deficit, because the country needs to import goods to cover the costs of the war and also meet the needs of the civilians. Therefore, it will reduce the money supply and increase the interest rate.
It is not bad to mention the so-called currency war. It is possible to define a currency war in which countries enter into a currency war to gain a relative advantage in world trade, which will lead to positive results, such as increasing exports, creating jobs, and ultimately growth in the economy.
What trade items gain value depending on the war?
In this section on the subject of the impact of war on the forex, it can be seen what trading items gain value due to the war. Or due to the impact of the war on forex, which of the trading items will have a higher value?
A military conflict similar to the Russia-Ukraine war that is usually applied between countries will result in partial or total trade embargoes on the exchange of goods. It is also possible that the pulse of trade flows will decrease in global trade. Governments during war special the Russia-Ukraine war seek to balance two goals. One of these goals is to maximize the income obtained during the war and the other is to minimize the ability of their opponent to benefit militarily from trade. Governments trade with the enemy.
Factors that should be considered regarding the impact of war on forex, such as the time of the Russia-Ukraine war, the region of war in the world, etc. For example, during World War II in occupied Europe, and the Russia-Ukraine war, according to the current conditions, gold is the best and safest asset for It was to preserve wealth and liquidity. Valuable assets such as durable currency, land as well as real estate. And businesses only work if you have a long-term horizon. During World War II, the black market was one of the money-making professions.
What should traders do during the war in Forex?
Regarding the impact of the war on forex, in recent years. Because the structures of the global oil market have changed. For this reason, the recent fluctuations will not be very damaging to the United States. And the impact of the war on forex is not very worrisome.
Another reason that can be considered as the cause of the calmness of the markets and the indifference of investors is psychological reasons. That makes the war on forex weaker. Investors have witnessed the return of calm to the market after the major economic crises that America has gone through. This is why most markets leave it out.
Best investments during the Ukraine war
Currently, the world is witnessing a war between Russia and Ukraine. And if this war leads to a conflict between the United States and its allies, it will cost a lot. According to experience, the US spent 6.4 billion dollars on wars after September 11. Which is a high and significant figure for the country’s gross domestic product. Investment experts believe that past wars have not caused long-term declines in US stocks. In war conditions, the market may become risk-averse or risk-taking. If traders are optimistic about economic developments, risk-taking will be strengthened. Otherwise, if traders become pessimistic, the market will become risk-averse.
Best investments during the Ukraine war an example that can be given is that in the event of tension between economic powers such as America and China, traders go for safe investment and this is in the sense of being risk averse. Stocks and oil can be called risky assets. It is interesting that since most of the volume of oil and gas production and precious metals is supplied by Russia, and the wheat production of both countries involved in the war (Russia and Ukraine) is significant in the world, it could have a great impact on the global prices of the mentioned goods. Let’s say that due to the critical nature of the issue, we witnessed incredible growth in prices. The safe assets of US treasury bonds, and stable currencies such as the Japanese yen, US dollar, and Australian dollar are also considered as stable currencies and safe assets.
how do markets respond to war and geopolitics?
The impact of war on the forex is considered one of the important factors that can be investigated in fundamental analysis. Regarding The impact of war on the forex, it can be said that in war conditions, it will be different depending on where and between which countries the war took place. If major economic powers engage in war, traders choose risk aversion and look for lower-risk trading items. It depends on the level of confidence of traders and investors in the market that they look at the market optimistically or vice versa. In each of the mentioned situations, different trading decisions will be made by traders.
In the end, the hope is that the article on the impact of war on the forex has attracted the opinions of your dear ones. Keep in mind that you can send us your valuable comments or questions through the comments section. If you need help with any of the topics, you can contact us through WhatsApp.
exactly. Russia- Ukraine war clearly affected the forex market and some specific instruments.
yes, that’s right. Thanks for sharing your opinion with us.
very usefull article.thanks
Thanks for your comment.