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World Cup Currencies: Who Were the Winners and Losers?

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By Patrick Foot, writer at IG, a leading CFD provider in the UK.

Now that the World Cup is over and the dust has settled on Germany’s impressive win, the interesting job of examining its impact outside of the world of sport can begin.

All in all, the 32 teams competing at this World Cup represented 25 currencies:

  • There were six currencies in major pairs present – GBP, USD, JPY, AUD, CHF and EUR – though theycomprised of 13 teams thanks to the ubiquitous euro.
  • Four emerging currencies were on show: the host nation’s BRL, CLP, KRW and RUB. One exotic currency, MXN, makes up the regularly traded teams.
  • That leaves 14 nations (including finalists Argentina) that are not covered by IG’s forex trading platform.

 

The Brazilian real has had a fairly strong year so far, rising against the USD from 0.4233 on January 1 to 0.4489 at the beginning of the tournament. Despite some fairly heavy volatility during the tournament, rising as high as 0.4545 and low as 0.4421, BRL has seen a broad improvement during the past month.A successful hosting, if not a successful campaign, has left the BRL at a value of 0.4500 by the end of the tournament.

Much of the coverage from Germany’s victory has made a great deal out of their strength beyond football. In terms of currency, however, 2014 hasn’t been a great year. The euro is currently down against the GBP, USD, JPY and CHF since January 1, steadily undoing the quiet gains posted in 2013.

During the tournament, Europe’s mixed performance on the field was matched by a mixed performance off it. On the eve of the final, the euro was down against every major pair bar USD when compared to the opening day. Germany’s win (the first of any European team in South America) appears to have instilled some confidence in traders, however, with the euro opening strongly on the 14th against the dollar, pound and yen.

Overall, it wasn’t a great tournament for emerging economies, with Brazil’s ignominious performance, and quick exits from South Korea and Russia sparking outrage at their managers; only Chile can leave Brazil with a campaign considered successful. Luckily for Russia, the ruble’s performance did not match their team’s, trading 2% higher against the dollar at the time of Russia’s exit on June 26. South Korea’s stalling campaign saw the won make no real gains.

The Chilean peso, however, was over 1% up against the USD from the beginning of the tournament as Chile prepared to face Brazil in the last 16. Those gains were put in check a little as Chile made their exit, but it is trading positively at time of writing.

Finally, spare a thought for Argentina. The peso has been on a negative trend for some time now, with a plunge at the beginning of the year dropping its value to around 0.12 dollars. Their road to runner up position has done little to reverse this, despite a brief rally after their opening win against Bosnia Herzegovina. Since that peak of .123, the peso has tumbled to a value of .1227 after Argentina lost the final: a new record low.

Investors in the euro may have Joachim Low to thank if their currency performs a turnaround in the latter half of 2014, and Brazil may yet see their economy pick up after a tournament that exceeded expectations. Of course, predicting these movements for investment insight before the tournament would have required almost clairvoyant insight; but in hindsight the global impact of the World Cup is a marvel to behold.

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This information has been prepared by IG, a trading name of IG Markets Limited. The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

 

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