HomeHow do the Olympic Games Impact Forex?

How do the Olympic Games Impact Forex?

For better or worse, major events often have a significant impact on the Forex market. The cancellation of such events can also wreak havoc on the economy, as we have seen happening throughout the past year. The long-awaited Olympic and Paralympic Games, originally scheduled to take place in 2020, were outright cancelled as Japan entered a state-of-emergency due to the Coronavirus pandemic. A year later, the Olympics will be taking place although things will be a little bit different to what we’re used to.

Japan has announced that no foreign spectators will be allowed to attend the upcoming Olympic Games in Tokyo. According to economists, this decision is a worthy compromise if it means that the Olympics will be able to take place this year. But what effects will this have on the nation’s economy?

Looking back at last year’s cancellation, the Bank of Japan immediately reduced its growth forecast as the coronavirus hit the nation in full force. The Japanese Yen took a blow along with the rest of the world, with volatility becoming a common theme throughout 2020.

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Economic Impact of the Olympics   

Although hosting the Olympics is a very expensive project, the event brings many benefits to the hosting country’s economy. The cities where the Games are held gain improved infrastructure, as well as tourist accommodation, road construction, airport and railways and environmental improvements.

Altogether, these improvements generate more employment opportunities as well as increased revenue from sponsors and investors. The huge crowds of spectators who travel to attend the Olympics also boost the country’s economy with a high amount of spending on tourism and leisure activities.

The Decision

The Organisation Committee for the Tokyo 2020 Olympics announced that individuals will not be able to travel into Japan at the time of the Olympics, to prevent further spread of the coronavirus pandemic. The Games are scheduled to take place from the 23rd of July to the 8th of August 2021, while the Paralympics will take place from the 24th of February to the 5th of September 2021.

As the Olympic Games are set to take place without any fans this year, what can traders expect from the Japanese Yen?

The economic hit resulting from the banning of overseas spectators could mean that Japan will miss out on 600 billion yen (approximately $5.5 billion), while the shorter-term effect of empty hotel rooms and no ticket sales would amount to 250 billion yen. This could cause further volatility for the USD/JPY currency pair.

As the Olympic Games draw closer, traders can expect several opportunities to profit by opening long or short positions on USD/JPY. Trade your favourite currency pairs today at www.cedarfx.com!

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