Exchange Rates During Financial Crises

12 Pages Posted: 10 Aug 2012

See all articles by Marion Kohler

Marion Kohler

Bank for International Settlements (BIS)

Date Written: March 1, 2010


Exchange rate movements during the global financial crisis of 2007–09 were unusual. Unlike in two previous episodes – the Asian crisis of 1997–98 and the crisis following the Russian debt default in 1998 – in 2008 many countries that were not at the centre of the crisis saw their currencies depreciate sharply. Such crisis-related movements reversed strongly for a number of countries. Two factors are likely to have contributed to these developments. First, during the latest crisis, safe haven effects went against the typical pattern of crisis-related flows. Second, interest rate differentials explain more of the crisis-related exchange rate movements in 2008–09 than in the past. This probably reflects structural changes in the determinants of exchange rate dynamics such as the increased role of carry trade activity.

JEL Classification: F3, G01

Suggested Citation

Kohler, Marion, Exchange Rates During Financial Crises (March 1, 2010). BIS Quarterly Review, March 2010, Available at SSRN:

Marion Kohler (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

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