What is is forex difficult mayzus fx FTSE and the London Stock Exchange? Political uncertainty and exchange rate impact Can political impact change how investors assess a currency? Which countries do we know of that are either very safe or unsafe?
Read more to understand how certain political factors can influence exchange rates. A factor that may highly influence the exchange rate in the short, medium and long term are political unrest. The main reason is that it is difficult to estimate what will happen in a country with political unrest. It also give questions about how economic policy will look like in the future. As an investors, you probobly have to pay for this kind of concern, which may be reflected in the exchange rate and foreign investment in the country. Political uncertainty and valuation of assets Political uncertainty makes it difficult to value assets in the future, since unexpected policy decisions may quickly change the valuation of a currency. In such situations, the exchange rates tend to weakened and be more volatile.
At the same time, the willingness of investors to have their money invested in the country fall sharply, because you do not know exactly which politics will be conducted in the future. As an example of political unrest, we have Venezuela been talking about nationalizing certain assets and later also done that. In such situations, investors are forced to sell their assets, way below market prices. The one only only allowed buyer will be the state. In such situations, many investors escape, thus reducing the demand of the currency and weaken the country’s exchange rate. Other examples of political concern is when a country changes its government all too often and thus are not consistent with their elections. It creates political uncertainty because you do not know exactly when and how a new government will lead the country.