While currencies are constructs created by man, the fact is that real situations and events have the power to affect the currency’s exchange rates at any given moment.
Let’s take a historical look at several big events that affected the currency exchange rates of several countries.
The first event we’ll be looking at is how the Brexit affected the Pound. When the Brexit vote went through, most of the population was stunned. Naturally, people though about what this would mean for the economies around the globe.
As many predicted, the British Pound currency value did go down. It actually dropped by 12 percent, with more people believing that more was to come.
However, the Brexit also taught us another thing. The British state is actually in good standings with countries that have strong and stable economies and currencies. As such, this allowed them to stabilize pretty quickly and stop any more bleeding.
This taught us that sometimes, it is about who you know. Traders should look at the relationships of countries and how it would affect the currency rates.
United States’ Sanctions Against Iran
Eight years ago, in 2012, the United States set sanctions against Iran and affected their currency. The United States had an ultimatum: you could continue working with Iran’s central bank and sever ties with the United States, or just stop working Iran banks altogether.
The thing about this was the central bank of Iran was the same bank that was taking care of all the oil exports to the world. On the other hand, the United States had one of the strongest currencies and economies.
People were confused as what to do at the moment, but sure enough, there was a decline of 60 percent in just a week’s time for Iran. What did we learn here? Perhaps to plan your actions well when United States is in the picture.
These are only a few historical events that effected currency exchange rates. We hope that these have taught you the importance of looking at current events for what affects currencies.