Business & Finance

How does war in Ukraine affect the Australian forex market?

The ongoing conflict in Ukraine has been causing wild fluctuations in the global foreign exchange markets. While the effects have been particularly pronounced in Europe, they have also been felt in other regions, including Australasia.

What is the Ukrainian war, and how did it start?

The Ukrainian War started back in 2014. Forex traders were the first to spot the unrest, as they saw the international market for the Russian Ruble jump as tensions between Russia and Ukraine rose. Forex traders became interested in the Ukraine war when it affected the international market. Some forex trading software and platforms were also pointing out and documenting unrest in the market. 

The war began when Russia annexed Crimea, previously part of Ukraine, leading to economic sanctions imposed on Russia by the international community. In response, Russia began to sell its foreign currency reserves, driving down the Ruble’s value. This had a ripple effect on other currencies and caused volatility in the forex market.

How is war in Ukraine affecting the Australian forex market currently?

Forex traders keep a close eye on international news events that have the potential to impact the currency market. The current humanitarian crisis in Ukraine is one such event. While the conflict has not yet had a significant direct effect on the Australian forex market, it has led to increased volatility and uncertainty among traders. Indirectly, the war has also affected the Australian dollar by causing a decrease in demand for riskier currencies like the AUD. As the situation in Ukraine continues to develop, forex traders will be closely monitoring for any other potential impacts on the market.

The economic effects of the Ukrainian war on Australia

Forex traders were quick to react to the news of the outbreak of hostilities in Ukraine. The Australian dollar fell against most major currencies as international markets reacted to the heightened risk of conflict in Europe. The war in Ukraine has had a significant impact on the Australian economy, with Forex traders and businesses feeling the brunt of the economic effects. 

Since the conflict, Australia and Russia’s ties have deteriorated, with trade between the two countries declining by 50%. The economic impact of the sanctions has reverberated throughout Australia, hitting businesses that export to Russia. In addition, the war has caused a sharp increase in oil prices, which is likely to lead to higher fuel prices for Australian consumers. Overall, the economic impact of the Ukraine war on Australia has been negative, with businesses and consumers feeling the pinch.

Political effects of the Ukraine war on Australia

Forex traders were some of the biggest losers in Australia from the outbreak of fighting in Ukraine. The international market for foreign exchange went into a frenzy as tensions between Kyiv and Moscow increased, with the Australian dollar sliding to a five-month low against the greenback. 

The war has also had flow-on effects on other markets and industries. For example, many Australian companies exposed to Russia have seen their share prices plunge as Western countries impose sanctions on Moscow. The Ukraine war also impacts Australian politics, with Prime Minister Scott Morison coming under pressure to take a tougher stance against Russia. Australian interests will be affected as the conflict wreaks further havoc on the region.

What can Australian forex traders do to protect their investments?

In times of war and unrest, there are a few things to protect your investments as an Australian forex trader:

  • Firstly, it goes without saying that protecting your investments begin with ensuring you choose a forex broker regulated by the Australian Securities and Investments Commission (ASIC).
  • Secondly, you can consider trading different currency pairs to diversify your forex portfolio, so as to spread the risk of losing money on one or two positions.
  • In line with the idea of portfolio diversification, you can also consider purchasing other investment products that are less related to the forex market and currency rates. These could be REITs (Real Estate Investment Trusts).
  • In times of extreme tension and instability, you may even consider closing your investment positions, especially those that are causing you to lose money. Many believe that in unstable times, cash is king, and it is better to stay out of the market instead of taking risks.