The current war in Ukraine is impacting foreign exchange rates because it is causing a lot of instability in the region. Investors are concerned about the potential for wider conflict, which negatively impacts the value of the Ukrainian hryvnia and other regional currencies (Liadze et al., 2022). The situation is also affecting global currency markets, as investors seek safe havens in more stable currencies like the U.S. dollar and the Euro. This has led to volatility in these markets and to fluctuations in exchange rates. Currencies of countries that have taken a strong stance against Russia, such as the U.S. dollar and the Euro, have significantly increased in value when compared to the Russian ruble (Liadze et al., 2022). This has caused significant problems for Russia’s economy, which is largely dependent on oil exports. As oil prices have plummeted in recent months, so has the ruble’s value. This has made it increasingly difficult for Russia to import goods and service its debt obligations.
Investors do not feel safe putting their money into a country that is embroiled in a conflict, and as a result, the value of its currency declines. Additionally, the war has disrupted trade routes and decreased overall economic activity (Liadze et al., 2022). This, too, has had an impact on the currency’s value. Conversely, it has been a very tumultuous time for Ukraine and its economy, and as a result, the value of its currency has suffered. Overall, the war in Ukraine is having an important effect on currency values and exchange rates, and it is likely to continue to do so until there is a resolution to the conflict.
References
Hill, Hult. (n.d.). International business: Competing in the global marketplace, 13th Edition, McGraw Hill. ISBN: 971264545018
Liadze, I., Macchiarelli, C., Mortimer-Lee, P., & Juanino, P. S. (2022). The economic costs of the Russia-Ukraine conflict. NIESR Policy Paper, 1-9.
Yermack, D. (2017). Corporate governance and blockchains.Review of Finance, 21(1), 7-31.