Effects of the pandemic in international finance

First let us define what is the International finance, International finance also known
as international monetary economics or international macroeconomics) is the branch of financial
economics broadly concerned with monetary and macroeconomic interrelations between two or
more countries focusing on areas such as foreign direct investment and currency exchange
rates.

International finance examines the dynamics of the global financial system, international

monetary systems, balance of payments, exchange rates, foreign direct investment, and how
these topics relate to international trade

International finance is a way to analyze the economic status of the countries you may wish to
do business with, judge the foreign markets, compare inflation rates and pay bills in a foreign
currency. Without international finance, you would not be able to compare currency exchange
to figure out the cost of doing business abroad.

The reason why we have international finance is because of Increased in globalization which
magnified the importance of it.

An international system of finance helps to keep the peace between nations in this globalized
world. Without a system of regulating cross-border financial transactions, each nation would act
in its own self-interest. The chance of international conflict is high.

International finance deals with the economic interactions between multiple countries, rather
than narrowly focusing on individual markets. 

Having said the role of international finance to our monetary concerns we can now see the
impact of pandemic to it as we, common people have been directly affected by the pandemic.

At the start of the year, most investors expected the 11-year bull market to continue in 2020,
only to be shockingly disabused of that notion by the spread of COVID-19. In currency markets
this took the form of a flight to US$, 11 selected currencies lost value in relation to the US$
since the start of the year. CNY almost maintained its value, but it is the only of the selected
currencies that does not have a floating exchange rate. Among the floating currencies, JPY and
EUR lost least value, and AU$ most, with GBP in between. On 20 March, GBP traded at
US$1.15, its lowest value since 1985. The price of AU$ is likely to have been adversely
impacted by declining prices of commodities, a major source of Australia’s export revenues.

Among emerging market currencies KRW, PLN and INR followed closely the depreciation of
strong currencies such as the GBP. BRL, MXN and ZAR lost a third of value. The former group
includes relatively advanced economies of South Korea, which managed to contain the spread
of the virus early on, and Poland, which introduced quite strict containment measures as well.
These two countries, as well as India, do not rely on commodity exports, in stark contrast to
Brazil and South Africa. In addition, Brazil’s President has gained a reputation for denying the
severity of the crisis.
The crisis has highlighted the subordinate position of emerging and particularly developing
economies in international finance. While their performance in financial markets differed from
country to country, collectively they performed much worse than developed economies, despite
the fact that by early April many of them have recorded relatively few COVID ‐19 cases. With
weak domestic currencies, they are highly dependent on the US$, but, with few exceptions
(Mexico and Brazil) have not been offered direct access to liquidity from the Fed. Their
dependence on the US$, particularly when combined with foreign debt, also limits their
monetary and fiscal policies. By late April the total value of central bank interventions in all
emerging and developing countries was comparable to that of the Bank of Japan (Tooze 2020).
As such, these countries have to rely on international financial institutions.

In addition, the Dow fell from record highs to bear-market territory in a matter of weeks.
Investors need a way to price in risk, and as of April 2020, there are simply too many unknowns
surrounding COVID-19 for investors to predict the economic impact, leading to fear and
extreme volatility.

The spread in the United States, Europe and other regions continues to rapidly evolve. How
long the epidemic will last and its economic impact is difficult to predict. As a result, the stock
and bond markets have entered a period of extreme volatility, leaving investors to wonder:
What does COVID-19 mean for the global markets and economy?

The effect of COVID-19 remains uncertain. In a case such as this, when continued volatility can
be expected, it is wise to employ strategies that enhance returns, whether the market shifts
violently up or down.

Volatility can provide an opportunity for market-beating returns. The key is employing a
strategy that allows you to make money in volatile markets regardless of which direction they
turn.

Economists have lowered their estimates for global growth due to the
outbreak. Predictions include that China's economy will reach low growth levels that haven't
been seen since the 2008 financial crisis and may experience $800 billion in new bad loans.

Obviously, the international finance has been greatly affected with the pandemic, exchange rate
for an instance varies due to the state of a country in combating the pandemic. If a country
needs a precautionary loan to stop it from falling into an economic crisis, it would approach the
IMF or the International monetary fund.

In the private sector, the Institute of International Finance helps the international financial
industry to manage risks prudently, and advocates for the type of regulation that fosters global
financial stability and sustainable economic growth.

The pandemic leads a domino effect in the economy which is evident in every aspects of our
lives today , businesses had been paused or closed, less man power, less income for the
country and too much expense for the government to sustain the damages, up until now we
cannot see the freedom from this event and the world is much aware of its impact.
Sources:

https://bizfluent.com/list-6543075-problems-international-finance.html

https://www.forbes.com/sites/brianmenickella/2020/04/08/covid-19-worldwide-the-pandemics-
impact-on-the-economy-and-markets/#3d8ffd4928c3

https://onlinelibrary.wiley.com/doi/10.1111/tesg.12434