Question

In: Finance

how has Covid-19 affect the currency volatility? and how has it affect equities sell- off and...

how has Covid-19 affect the currency volatility? and how has it affect equities sell- off and supply of chain?

Solutions

Expert Solution

Covid 19 has highly affected the currency markets as there is a demand and supply shock in the whole system and there is a financial shock as well which has completely dried up the liquidity. People are fearing an impending recession due to this prolonged slowdown and currency markets has been badly affected as domestic currencies are highly losing up their value against dollars.

Currency volatility has returned with a vengeance amid the global pendamic as people are uncertain about the stability of the currency as there is fear of an incoming recession and the vaccine has not yet been discovered so domestic currency are losing their value against dollars as people are factoring in a weakness in growth leading to recession.

It has led to selling of the equities as many companies have announced shutdown of their operations like airlines and oil related stocks. The Federal bank of different countries are alredy coming out with several rate cuts to inflate demand and bailout packages are also being discussed for different sectors so there is degrowth being projected in diffferent economies leading to widespread selling off securities.

it has also disrupted supply chain as countries are on a complete lockdown and there is no supply chain which is currently in operation. Only things which are of essential use for survival like food items are operational .Rest of the sectors are completely shut amid fears of covid 19.

So it has completely collapsed the economic engine.


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