Currency, a Business Card of a Nation

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wisepowder

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A currency represents a country's creditworthiness. Compared with stocks, bonds and other markets, the Forex market is more susceptible to
national and international political factors.To get more news about WikiFX, you can visit wikifx official website.

The main reason is that the forex market is mainly composed of liquid
assets, which are referred to as currencies. The daily trading volume of
the forex market has exceeded 6 trillion US dollars. Under the
turbulent political situation, the Forex will have greater risks than
other assets; when faced with risks, speculators will liquidate certain
currency to avoid risks. So the rapid exchange from one currency to
another and the acceleration of the flow rate will exacerbate the
volatility of the forex market. Generally speaking, the results of
political events are often difficult to predict. Most of them are
accidental and sudden. Therefore, the market is more sensitive to such
events. The short-term fluctuations in the exchange rate of the forex
market are driven by the possibility of exaggerating the economic
impact, the true impact.

Generally, political events include wars, border conflicts, elections,
political scandals, changes in government leaders, terrorist incidents,
political instability, and consequential financial crises. Due to the
different locations, causes, and affected regions of emergencies, the
volatility reflected in various forex currencies is also different.
Therefore, forex investors need to analyze specific issues for such
important factors that affect exchange rate changes.


On the day of the 1992 British election, the pound fluctuated
drastically in the forex market. From the perspective of the exchange
rate of the British pound to Deutschmark, the fluctuation range is 2%,
reaching 600 points, and the fluctuations throughout the day are
dramatic. Two days before the election, the forex market began to buy
forex such as the British pounds and Deutschmark after hearing the
rumors that Major was close to Kinnock in the polls. On the day of the
general election, Kinnock‘s votes and poll results were still ahead of
Major at the beginning, and the market began to sell the pound
drastically again. But before long, Major’s votes began to rise
steadily, and a whirlwind of selling foreign currency to buy the British
pound was immediately blown up in the forex market. The exchange rate
of the pound to the Deutschmark rose rapidly, from the 2.8477 marks to
2.9053.
The price movement of GBP before and after the British general election
shows that the excessive fluctuation of the exchange rate may be
sustained for a long time due to the support of market expectations.
Before this expectation is broken, the market may sometimes think that
the short-term equilibrium price is reasonable. However, if expectations
of the forex market remain unconfirmed, the exchange rate trend
distorted by unexpected events will return to the original trend.

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Posted 10 Dec 2020

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