COVID-19 caused a devastating impact on the foreign exchange market. When all the major economies announced lockdown and put restrictions on global travel in March last year, the foreign exchange market faced the wrath like so many other industries. The unemployment reached unimaginable figures when COVID-19 cases were rising at peak and with rising job losses, remittances fell to tragic lows.

There was no demand as far as foreign exchange was concerned as people were busy battling for their livelihoods. The situation has now improved significantly but the road to full recovery is still unknown.

Biggest drop in Remittances in Recent Times due to COVID-19

Foreign travel industry was one of the worst-hit sectors due to COVID crisis and the ban on international flights shut down the segment entirely. A lot of companies which deal in currency exchange, forex cards, international remittances and travel essentials such as Travel Insurance, International SIM, Tours and Activities had to shut down their operations completely. All their product segments did not add anything to the revenue due to a complete halt amid the lockdown except money transfer and forex card re-loads which was being utilized by the customers who are or have their close relatives living overseas.

In reality, as most of the parents called their children studying abroad back to India, each of these services were also seeing a slump, and now they didn't have to wire funds for their living costs overseas. The summer holiday season got completely washed out due to COVID-19. A lot of the business meetings were also done online. The meeting shifted to Zoom calls from face-to-face.

With low-income emerging economies expected to earn 110 billion US Dollars less due to the impact of COVID-19 in 2020, the World Bank has estimated the biggest fall in remittances in modern times.

In low- and middle-income countries, international money transfers also known as remittances, which are the cash flows sent home by foreign workers to take care of their families, are a major source of funding.

COVID-19 Impact on Exchange Rates

It has been interesting to study the interrelationship of the emergence of the COVID-19 outbreak as it spread throughout the world with the volatility of exchange rates. There are no certainties with currency fluctuations and all is subjective, and that is exactly how it happened with the outbreak. Usually, nations seeing large regular spikes in new cases of COVID-19 have seen their currencies collapse. That also lays the groundwork for currency strength when countries have made improvements controlling the transmission of the infection.

The effect of the Coronavirus outbreak on currency markets has, from a fundamental point of view, made its way through the process of shifting quantitative prospects of potential economic development. Nations with stable economies have the potential to draw external flows of capital, and exchange rates are a critical component of foreign investment.

Economic development hopes were downgraded when the pandemic struck a country or area severely for the first time, fearing that parts of the economy would need to close down. By comparison, as a nation gained greater control of the virus and reported cases reduced on a regular basis, the consumer narrative was dominated by enthusiasm about the reopening of the country.

Mostly during early phases of the deadly virus through the end of May, the Chinese yuan momentarily fell. It became evident from June onwards, however, that China had made significant progress in managing the spread of the disease. The recovery came back high, which can be seen in domestic air travel's comeback trend. At the same time, as China experienced its economic recovery in the summer of 2020, US economic hopes were struck by a second wave of the flu as it swept across the country. In the July-September span, the comparative incongruity of the virus embedded in China and still rising in the United States of America was probably the main reason why China's currency rallied powerfully.

Now let's take the matter of the Euro, which, when the pandemic started, was actually poor against the US dollar. Even before Coronavirus came to the US, Europe, particularly Italy, had been badly affected. After which, from a rock bottom on March 20, Euro jumped by more than 10% against the US dollar by the end of August. That being said, the surge of Euro was stopped, not by a policy decision or by any major iteration of economic figures. The rising proof of a second wave of the outbreak gaining traction in Spain and France, among many other countries, which was supposed to adversely affect the economic recovery, was what stopped the rally of the famous Euro.

Out of all the Asian currencies, Indian Rupee came out as the worst performing currency in 2020. Just to give you a little perspective that even Pakistan's and Sri Lanka's currency fared better than INR when COVID-19 impacted the planet.

Getting best forex rates in uncertain times

It goes without saying that saving money as much as possible during an ongoing pandemic becomes even more so important. The times are uncertain and following the saying – ‘Money saved is money earned’ will help you in these tough times.

If you plan to send money overseas or you have to go abroad, you can get the best available forex deals on online forex & remittance platforms. The biggest advantage of choosing an online forex marketplace is that you do not need to step out of your home for any formality. You can book an order from the comfort of your home and avail the maximum benefits.

A lot of online forex platforms provide same day or next day doorstep delivery of the currency. As far as international money transfers are concerned, these platforms can process the amount within 12-36 business hours after you have confirmed the transaction. For your foreign travel, you can get amazing rates on forex card and save yourself from the volatility in the currency market. You do not need to worry about the hidden charges unlike in the case of banks which can drop quite a few charges and that can cause a dent in your pockets.