Forex Response to a Syrian Ceasefire

Syrian troops have pulled out of some occupied areas of the country, apparently in response to the ceasefire brokered by former United Nations Secretary General, Kofi Annan. If the Syrian leader follows through with his promises what will be the Forex response to a Syrian ceasefire? The Middle East is going through an “Arab Spring” of popular upheaval and overthrow of long standing dictatorial regimes such as in Libya, Yemen, and Egypt. But, the bloody crackdown and use of tanks and artillery in Syria has been more upsetting, to many, than the outright civil war that brought down Kaddafi in Libya. The butchery on the part of the Syrian military in putting down previously peaceful demonstrations has caused fellow Muslim countries to consider helping arm the rebels in Syria. For those who routinely deal in foreign currencies a pertinent issue will be the Forex response to a Syrian ceasefire. Trade goes on despite armed conflicts and foreign currency trading can be strongly affected by events such as the bloodshed in Syria.

The Forex response to a Syrian ceasefire will certainly depend upon whether or not President Assad follows through with a broader ceasefire. It also may depend upon whether the Syrian people are able to return to peaceful demonstrations or will simply use the ceasefire to assert themselves through guerilla tactics such as the recent bombings and fighting in upscale parts of Damascus. As far as a Forex response to a Syrian ceasefire is concerned there are a number of actors. Iran has been a patron of Syria for years but seems to be distancing itself in light of continued bloodshed. Syria’s allies and protectors have been Russia and China which have blocked action in the United Nations Security Council. Russia states that arming the opposition in Syria would only lead to more bloodshed. Most other nations believe that arming the opposition in Syria would help protect the innocent from the continuing slaughter. A year ago during the peaceful change of power in Egypt we wrote about Egypt and the Euro . Since that time Libya has rid itself of Kaddafi via a civil war. The concern of many is that Syria will end up more like Libya and less like Egypt.

The Middle East is a major oil producer. Armed conflict can easily spread across borders. The risk of interruption of oil supplies or a broader conflict in the region can unsettle currencies worldwide and not just in the Middle East. Couple the Syria unrest with the potential for a nuclear armed Iran and the Euro, US dollar, Yen, and Yuan will likely be affected. Japan’s dependence on foreign oil makes its economy vulnerable to conflict in the Middle East. Likewise, Europe depends to a degree on Middle Eastern oil. As local strife increases many will move their assets to the dollar as a safe haven currency . A Forex response to a Syrian ceasefire could have the opposite effect as peaceful and democratic Syria could help stabilize the Middle East and redirect efforts away from violence to trade and commerce.