The ever-changing landscape of geopolitics makes for a turbulent international economy. Currency exchange rates, or forex, have been particularly affected by the shifts in international politics, with varying degrees of impact. In this article, the impact of geopolitics on forex will be examined, noting the ways in which changes in international relations have created unstable market forces and uncertainty for forex traders. Geopolitical events can have a significant impact on foreign exchange (forex) markets. Events such as wars, trade wars, political unrest, financial instability, and even natural disasters can all disrupt global financial markets and have a significant impact on forex prices. For example, when a country imposes sanctions on another, the currency of the sanctioned nation can significantly decline in value. Similarly, conflicts between countries can lead to currency devaluations and spikes in volatility. In many cases, geopolitical events can also influence interest rates, with rises seen during times of instability. Ultimately, geopolitical events can spur large-scale capital flight from a nation or region, leading to currency depreciation.
By Nicole Knight Oct 31, 2023