4 Myths About COVID and the Forex Markets

More than two years after the COIVD virus escaped from a Chinese laboratory, people all over the world are still debating just how widespread the damage was. After millions of deaths, tens of millions of serious illnesses, and untold financial destruction, few speak of how COVID affected the foreign currency markets. Few would dispute the fact that the pandemic touched every aspect of personal, political, and financial life. Yet, for all the blatant evidence of the scale of the virus’s havoc, there are still several myths floating around the mainstream media. One, and perhaps the most misleading, is that the viral scourge has little to no effect on forex exchanges.

Other falsehoods imply that the negative results of COVID have nearly dissipated, people who traded FX to make ends meet have returned to their former jobs, the Chinese yuan was hard hit, and lockdowns helped nations preserve the strength of their respective currencies. Whenever there’s a major global crisis that lasts for more than a few weeks, urban legends abound, and the disease that struck mankind in early 2020 is no exception. Here are the most common myths still in circulation regarding the relationship between the pandemic and the international foreign exchange markets.

The Pandemic’s Effect Was Minimal

Of all the misconceptions about the effects of the COVID-19 pandemic, the most blatant one is that it had either little or no impact on forex markets. A corollary is that the virus harmed the foreign exchange trading environment. What’s the truth? Not only did the disease cause an increase in the number of people who trade currencies, but it also led to an expansion of the brokerage industry as millions of first-time customers signed up for accounts to trade from the safety and comfort of their homes. As the entire global economy was ravaged by unemployment, slow growth, business closures, and other forms of financial havoc, many of the leading international brokerage firms, like https://www.avatrade.ca/, and others saw a wave of new customers who wanted to get involved in the 24/7 action of currency trading.

Currencies Have Recovered From COVID

While some nations, notably the US and Japan, seem to have shaken the long-term effects of the malady, most have not. In places like Europe, China, and India, there are still limited or full-scale lockdowns and business closures in effect. While some of the major global currencies are on the rebound, not all national economies have followed suit. It’s not accurate to say that anyone or anything has recovered from the viral scourge because variants are still popping up in numerous nations. One of the ironies of the FX marketplace is that sometimes a nation’s economy can be in a very bad state, yet its currency appears stable or strong. Likewise, just because a country’s overall financial state of health is excellent does not mean its currency is performing in the same fashion.

New Traders Have Returned to Their Old Jobs

After huge numbers of homebound adults turned to FX trading as a source of income during the lockdowns, the majority of them continued to pursue the practice even after they were able to return to their former jobs or find new ones outside the home. Indeed, while brokerage firms were experiencing waves of new customers arriving in 2020 and 2021, there was already evidence that the phenomenon was more than a one-off moneymaking venture for financially desperate people. That’s because so many new traders had other sources of income and tried FX because they were forced to remain in their homes. They liked it so much that they decided to stick around and become permanent forex devotees. It makes logical sense that once a person discovers an interesting, exciting way to earn money, they usually don’t stop doing it.

China’s Yuan Was Hardest Hit

The yuan, against all odds, actually outperformed most other world currencies in the year following the onset of the global disease. The problem for China was not a weakened yuan but the harsh and almost total lockdowns that continue to this day in some of the nation’s largest cities. It’s important to note that even though the yuan got stronger against its benchmark companion, the dollar, things began to go south for the Asian nation in early April when apparent long-term effects of stringent lockdowns became apparent. Industrial output in China is faltering, the yuan has lost its luster as a serious competitor to the USD and euro, and the ambitious belt and road policy is beginning to show signs of failure for the first time since its inception.

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