Impact of the COVID-19 Outbreak on the Currency Exchanges of Selected Countries

Abstract

The paper aims to analyse the impact of the COVID outbreak on the currency market. The study considers spot rates of seven major currencies (i.e., EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, USD/CHF, and CHF/JPY). To capture the impact of the outbreak on returns and the volatility of returns of seven currencies during pandemic, the study has segregated in two window periods (i.e., pre- [1st Jan 2019 to 31st Dec, 2019] and post-outbreak of COVID-19 [1st Jan, 2020 to 22nd Dec, 2020]). The study has applied various methods and models (i.e., econometric-based compounded annual growth rate [CAGR], dummy variable regression, and generalized autoregressive conditional heteroskedasticity [GARCH]). The result of the study captures the negative impact of the COVID-19 pandemic on three currencies—USD/JPY, AUD/USD, and USD/CHF—and positive significant impact on EUR/USD, GBP/USD, USD/CAD, and CHF/JPY. Investors can take short position in these while having long position in other currencies. The inferences drawn from the analysis are providing insight to investors and hedgers.

Artificial neural network (ANN)-based estimation of the influence of COVID-19 pandemic on dynamic and emerging financial markets

“… Serial no. Authors & (year) Title Variables Approaches Findings 1 Tan and Xue (2021) Research on the Development of Digital Currencies under the COVID-19 epidemic COVID-19 epidemic and Digital Currencies Genetic Statistics ∗ ∗ + 2 Xu and Lien (2021) COVID-19 and currency dependences: Empirical evidence from BRICS COVID-19 pandemic and CER of BRICS countries against USD GARCH (1,1)-t ∗+ 3 Aslam et al (2020) On the efficiency of foreign exchange markets in times of the COVID-19 pandemic COVID-19 outbreak and forex market efficiency Multifractal Detrended Fluctuation Analysis (MF-DFA) ∗ ∗ − 4 Phiri (2021) Changing efficiency of BRICS currency markets during the COVID-19 pandemic Efficiency of BRICS currency markets & COVID-19 pandemic Wavelets neural network ∗− 5 Li et al (2021) COVID-19 and currency market: A comparative analysis of exchange rate movement in China and USA during pandemic COVID-19 confirmed cased & deaths and exchange rates Autoregressive Distributed Lag (ARDL) model ∗− 6 Sharma et al (2022) Impact of the COVID-19 Outbreak on the Currency Exchanges of Selected Countries COVID outbreak and currency market Generalized Autoregressive Conditional Heteroskedasticity (GARCH) ∗± 7 Bazán-Palomino and Winkelried (2021) FX markets' reactions to COVID-19: Are they different? COVID-19 pandemic and FX markets Traditional mean-variance portfolio, diversification ratio, maximally diversified (MD) portfolio & global minimum variance (GMV) portfolio ∗ ∗ ± 8 Devpura (2021) Effect of COVID-19 on the relationship between EUR/USD exchange rate and oil price COVID-19, CER & futures oil prices Predictive regression model ∗ ...…”

Dampak Perubahan Nilai Mata Uang Rupiah Terhadap Indeks Pasar Modal Indonesia Dimoderasi Fluktuasi Covid-19

“…Namun demikian, pada awal tahun 2020, sebuah krisis keuangan yang disebabkan oleh adanya kondisi pandemi yang mengakibatkan adanya krisis kesehatan dan berdampak pada krisis keuangan secara global, sebagai akibat dari berkurangnya mobilitas dan kegiatan ekonomi (Wicaksono & Uluwiyah, 2020) mengakibatkan guncangan pada nilai tukar dan juga perubahan pada pasar modal. Pada sejumlah penelitian yang disebutkan bahwa dampak dari pada periode Pandemi Covid-19 telah terjadi penurunan nilai mata uang seperti yang terjadi di Arab Saudi (Alzyadat & Evan, 2021), mata uang Turki (Dineri & Çütçü, 2020),mata uang China/Amerika (Li, Su, Yaqoob, & Sajid, 2021), USD/JPY, AUD/USD, and USD/CHF (Sharma, Yadav, & Jha, 2022). Sedangkan pada mata uang EUR/USD, GBP/USD, USD/CAD, and CHF/JPY terjadi hal yang berkebalikan yaitu pada kondisi pandemi nilai tukar mata uang tersebut mengalami peningkatan (Sharma et al, 2022).…”

“…Pada sejumlah penelitian yang disebutkan bahwa dampak dari pada periode Pandemi Covid-19 telah terjadi penurunan nilai mata uang seperti yang terjadi di Arab Saudi (Alzyadat & Evan, 2021), mata uang Turki (Dineri & Çütçü, 2020),mata uang China/Amerika (Li, Su, Yaqoob, & Sajid, 2021), USD/JPY, AUD/USD, and USD/CHF (Sharma, Yadav, & Jha, 2022). Sedangkan pada mata uang EUR/USD, GBP/USD, USD/CAD, and CHF/JPY terjadi hal yang berkebalikan yaitu pada kondisi pandemi nilai tukar mata uang tersebut mengalami peningkatan (Sharma et al, 2022).…”

“…Pada penelitian yang dilakukan setelah munculnya Pandemi Covid-19, peneliti memiliki hasil yang berbeda dimana fluktuasi Covid 19 berdampak negatif terhadap Nilai Tukar 5 Mata Uang Utama Global, yang ditunjukkan pada penelitian (Dineri & Çütçü, 2020;Li et al, 2021;Sharma et al, 2022;Syahri & Robiyanto, 2020;Wicaksono & Uluwiyah, 2020). Dengan demikian, maka pengaruh perubahan nilai tukar mata uang terhadap perubahan indeks saham dengan memperhatikan faktor fluktuasi covid perlu untuk dilakukan penelitian ulang.…”

Asymmetric impact of the COVID-19 pandemic on foreign exchange markets: Evidence from an extreme quantile approach

“…So far, a limited number of studies have taken into consideration the relationship between the COVID-19 pandemic and foreign exchange rate markets (Sharma et al 2022). Fasanya et al (2020) find a high degree of interrelatedness between the global COVID-19 occurrences and the price spillover of the majorly traded currency pairs.…”