Economic and Political Effects on Currency Clustering Dynamics

We propose a new measure named the symbolic performance to better understand the structure of foreign exchange markets. Instead of considering currency pairs, we isolate a quantity that describes each currency's position in the market, independent of a base currency. We apply the k-means clustering algorithm to analyze how the roles of currencies change over time, from reference status or minimal appreciations and depreciations with respect to other currencies to large appreciations and depreciations. We show how different central bank interventions and economic and political developments, such as the cap of the Swiss franc to the euro enforced by the Swiss National Bank or the Brexit vote, affect the position of a currency in the global foreign exchange network