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

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  • Olga Dodd
  • Adrian Fernández-Pérez
  • Simon Sosvilla-Rivero

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 Fernández-Pérez & Simon Sosvilla-Rivero, 2024. "Currency and commodity return relationship under extreme geopolitical risks: evidence from the invasion of Ukraine," Applied Economics Letters, Taylor & Francis Journals, vol. 31(1), pages 46-55, January.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:1:p:46-55
    DOI: 10.1080/13504851.2022.2123101
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    1. António Miguel Martins, 2024. "Short‐term market impact of Black Sea Grain Initiative on four grain markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(4), pages 619-630, April.
    2. 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.
    3. Raza, Syed Ali & Guesmi, Khaled & Benkraiem, Ramzi & Anwar, Rija, 2024. "Precious metals and currency markets during the Russia-Ukraine conflict’s inflationary periods," Research in International Business and Finance, Elsevier, vol. 67(PA).
    4. 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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