The World seems to be changing day by day from Corona Virus to war-like situation with China. The occurrence of these catastrophic events is hard to keep up with. Coronavirus is expected to have a devastating impact on the business and financial markets. How will the Forex market be affected?
This pandemic sees many governments placing people in forced quarantine, public events have been cancelled, offices, restaurants and entertainment sphere are been shut down, schools are closed and whole cities and regions are isolated. It obviously affects huge corporations and companies, like Apple, Microsoft, Tesla as they are forced to shut down their factories based in China. These events may cause a deceleration in GDP, or even recession. Most of the economies all over the world are about to hit the bottom as the market crash becomes stronger due to the dangerous and fast-spreading Corona virus. This newly emerged disease seems to be a big threat to the forex market as the markets of the world experience confusion and chaos.
Let’s have a look at the currencies that may be affected the most.
Over the last days, there has been a rush on the Japanese yen. Since Japan is considered to be the largest creditor nation, Japanese yen is called a financial haven currency, especially in comparison to the US dollar. In the times of the global crisis, investors were tend to choose Japanese yen as a more stable currency (again compared to more risky USD). Therefore, considering the current situation with the market and investor preferences, there is a chance the USD/JPY will simply fall in value.
As the US dollar has fell, resulting in a higher volatility driving the value of the dollar up, we can surely say that Corona virus has a huge impact on these global markets. They are taking all the possible measures to liquidate this hit, however it seems inevitable.
A decelerating economy would weaken that country’s currency, however, a global crisis with most major economies affected may see the effect on the Forex market muted. The Coronavirus impact on the Forex market could affect certain currencies greatly and others may see very little increase in volatility.
Stock markets and forex trading
The Coronavirus impact on the Forex markets is inevitable, given the strain being taken on all major stock markets. Stock markets are facing great disturbances because of the possibility that this pandemic will put a limit on economic activity in a great way. This is plausible, as we are seeing restriction of movement to and from large geographical areas, major mass events shut down. And, we are not talking only about China.
In order to see the consequences of the Coronavirus on Forex market, we can look at how stock markets are affected, as stock markets are a perfect measure of the economic activity and also because these markets are interconnected.
If we compare the effects of the previous pandemics on the stock market, we will see that there was a little negative impact on the world economies. However, the impact of the current epidemics on Forex market may be very different.
With this massive shut down of whole countries in order to stop the spread of the Coronavirus, the impact on Forex market is inevitable as it may simply restrict economic activity.
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