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Currency and commodity return relationship under extreme geopolitical risks: Evidence from the invasion of Ukraine

Olga Dodd (), Adrian Fernandez-Perez () and Simon Sosvilla-Rivero ()
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Olga Dodd: Finance Department, Faculty of Business Economics and Law, Auckland University of Technology, New Zealand.
Adrian Fernandez-Perez: Finance Department, Faculty of Business Economics and Law, Auckland University of Technology, New Zealand.

No 202204, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: We examine the relationship between currency and commodity returns around the invasion of Ukraine in February 2022. We find that the expected positive contemporaneous relationship between currency and commodity returns reverses and becomes negative during this period of extreme geopolitical risks. In addition to commodity returns, currency returns around the invasion of Ukraine are significantly affected by geopolitical factors, particularly geographic distance to the war. Our results indicate that a war between two major commodity-exporting countries significantly affects global currency pricing.

Keywords: Foreign exchange rates; Currency return; Commodity return; Russian invasion; Ukraine war; Geographic distance. JEL classification: F31; F51; G13; G14. (search for similar items in EconPapers)
Pages: 21 pages
Date: 2022-04, Revised 2022-04
New Economics Papers: this item is included in nep-ban, nep-cis, nep-opm and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:202204

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