As the Greenback Slides: How Does Geopolitics Affect US Dollar Returns?

No surprise to anyone who deals in cross border transactions: the USD has had it worst start to the year (in terms of losses against the majors) since 1973: Causes? US trade policies and rising debt levels, at least according to the FT this morning.

These types of things are driven by internal political risk, and there is a rich literature on the topic using our ICRG ratings.

For example, in a 2018 study published in the Journal of Financial and Quantitative Analysis, an array of ICRG risk indicators were used to ascertain how geopolitical risk is priced in the cross-section of currency momentum and how it provides information beyond other conventional risk factors. In other words, the ICRG – which measures factors like political stability and economic risk within countries – helps explain the differences in returns between currency portfolios that have performed well and those that have performed poorly in the past.

(https://lnkd.in/e56V-E3g.)

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CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.