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

Author

Listed:
  • 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.)

  • Simon Sosvilla-Rivero

    (Complutense Institute for International Studies, Universidad Complutense de Madrid. 28223 Madrid, Spain.)

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.

Suggested Citation

  • Olga Dodd & Adrian Fernandez-Perez & Simon Sosvilla-Rivero, 2022. ""Currency and commodity return relationship under extreme geopolitical risks: Evidence from the invasion of Ukraine"," IREA Working Papers 202204, University of Barcelona, Research Institute of Applied Economics, revised Apr 2022.
    • Handle: RePEc:ira:wpaper:202204
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    File URL: http://www.ub.edu/irea/working_papers/2022/202204.pdf
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    References listed on IDEAS

    as
    1. Joëts, Marc & Mignon, Valérie & Razafindrabe, Tovonony, 2017. "Does the volatility of commodity prices reflect macroeconomic uncertainty?," Energy Economics, Elsevier, vol. 68(C), pages 313-326.
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    8. Joëts, Marc & Mignon, Valérie & Razafindrabe, Tovonony, 2017. "Does the volatility of commodity prices reflect macroeconomic uncertainty?," Energy Economics, Elsevier, vol. 68(C), pages 313-326.
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    Cited by:

    1. Florin Aliu & Jiří Kučera & Simona Hašková, 2023. "Agricultural Commodities in the Context of the Russia-Ukraine War: Evidence from Corn, Wheat, Barley, and Sunflower Oil," Forecasting, MDPI, vol. 5(1), pages 1-23, March.
    2. Martins, António Miguel & Correia, Pedro & Gouveia, Ricardo, 2023. "Russia-Ukraine conflict: The effect on European banks’ stock market returns," Journal of Multinational Financial Management, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Foreign exchange rates; Currency return; Commodity return; Russian invasion; Ukraine war; Geographic distance. JEL classification: F31; F51; G13; G14.;
    All these keywords.

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