Global Warming Effects on Forex Market
May 13, 2023
Global Warming Has Begun
The average surface temperature of the air has risen to about 1 degree Celsius compared to the 19th century. We all know the reason; we are all responsible for increasing carbon dioxide emissions into the atmosphere.
So yes, global warming has already begun, and we all remember major bushfires in Australia and withering coral reefs; the planet is not happy with us, and the global mean Sea level has risen by about 21 to 24 centimeters since 1880.
We all witnessed the massive destruction resulting from climate change on Earth and human life, but does it truly impact the global economy and Forex hard enough to cripple it?
The latest reports released by Barclays argue that the answer is yes; global warming effects on the forex market will be undeniable and perceptible.
The reports also warn central banks to be better equipped to grapple with the unprecedented economic disaster, and Forex is no exception.
The truth is, Central banks have been hauling their countries out of the subprime crisis that began in 2008, and the deep financial crisis is not over. Yet they must prepare themselves for another climate change and technology disaster.
Table of Contents
Chinese Renminbi and Japanese Yen Are Sensing the Threat
Let’s say global warming hits us as hard as it can. In that case:
- The sea level with rise dramatically.
- Air pollution increases
- Yield variability of major crops changes.
As you can see, global warming can disastrously affect countries like China and Japan. The Barclays report on the voice case scenario says that the Chinese renminbi and Japanese Yen could lose 50% of their value by 2070. After that, everything is possible, even the world’s next catastrophic financial chaos. What do you think?
Barclay’s predictions show that if you continue to neglect the planet, all human beings on Earth Will Supper the consequences, especially people from the most populated cities.
Climate Change and International Trade
Quantitative finances that are slower to adopt environmental, social, and corporate governance, known as ESG, Are struggling with the consequences of climate change. They are a definitive example of the negative impact of international trade on the environment. The FX (foreign exchange), with US$9.2 trillion worth of trade in a day, is one of them.
Barclay’s prediction shows how deeply the economy will suffer from climate change, and there will be many potential risks concerning foreign exchange. The outcome raises a red flag and lots of ambiguity when looking at financial models for the next 10 years. Barclays focused on the worst-case scenario and proposed different outcomes with different outlooks. For example, if countries were to levy carbon taxes and decrease carbon dioxide emissions, The future the different. Global warming eventually can wipe life along with Forex from the planet’s surface. In the following, we will look closely at the economic losses due to climate change:
Japanese Yen
According to Barclay’s prediction, not just global warming but geography is responsible for what will happen to the Yen. Yen is the most endangered currency in the worst-case scenarios of extreme climate change. Japan is surrounded by the Pacific Ocean, the Sea of Okhotsk, the Sea of Japan, and the East China Sea, and rising sea levels will endanger polluted citizens like Tokyo. If the global temperature rises at least 5 centigrade, the Yen will lose 11 percent of its value every 10 years.
Chinese yuan
The yuan or renminbi will experience 5 to 7 percent depreciation over the next 10 years, and every decade after that, it could worsen to more than 10%. China is a polluted country, and policymakers should prioritize the environment over economic growth before it’s too late.
US Dollar
As countries like Japan and China struggle with global warming consequences, the USA will benefit from the misery of developing countries Because it has a better economy. In contrast, other countries experience drops in production.
Australia AUD and Euro
Euro will tag along with the US dollar and benefit from climate change and surprisingly will Appreciate 0.5% against the US Dollar by 2030 in the next five decades, the Euro price will be 3.9% more than the US dollar.
It is interesting to mention that the Australian dollar wouldn’t suffer from global warming. Barclays predicted Australian Dollar’s 2.1 percent average increase every 10 decades, and developed countries with well-established economies seem more immune to climate change. In other words, Global warming effects on forex market in developed countries will be petite.
Bitcoin in The Name of Technology
Yes, we have mentioned before there are two hands responsible for global economic destruction; we have talked about global warming, and the other is Bitcoin.
Bitcoin and cryptocurrencies, in general, are the technological products that will kill central banks and the global economy if neglected.
Cryptocurrencies were designed to delete intermediaries in financial systems, and if central banks are too arrogant to accept crypto as a safeguard, they are doomed to exist.
Cryptocurrencies can be used as a medium of exchange for trading commodities in a peer-to-peer network, and there is no need to use central banks as an intermediary.
Not using central Banks will cripple the banking system in the worst-case scenarios of extreme global warming.
Global Warming Effects on Forex Market Are Undeniable
Think the financial crisis in 2008 was back? Wait to see the collapse of the entire banking system and economic losses due to climate change. With the sea level rising, the real state crises began, and banks already vulnerable could not deal with loans.
Barclays report shows $1.38 trillion in economic losses due to global warming in the last decade, which is 8-fold more since 1970. The bank expected a $2 trillion loss this decade. Countries’ production drops and the capital inflow decreases nexus resulting in major currencies losing their value. Global warming effects on forex market are undeniable even though USD, AUD, and Euro would extend their outperformance against other currencies over the next 50 years.
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