The effect of energy price shocks on commodity currencies during the war in Ukraine

Abstract

The ongoing geopolitical crisis that has emerged due to the war in Ukraine has created economic winners and losers. We adopt the DS-ARDL and Cross-Quantilogram approaches to examine the effect of higher energy prices on commodity currencies during this war. Our findings based on 4-h time frame data between January and November 2022 indicate a significant positive effect of energy price hikes on the value of the Australian dollar relative to the Japanese yen, Euro, and British pound. The comparison of the effects of gas and oil price hikes on the exchange rates reveals that these exchange rate movements have been mostly due to gas price shocks. Considering the effects of this war on the international economy, the most critical policy implications to improve the financial health of the economies are provided.