exchange rate history graph


How is exchange rate determined?

    At any point in time, in a given country, the exchange rate is determined by the interaction of the demand for foreign currency and the corresponding supply of foreign currency. Thus, the exchange rate is an equilibrium price (StE) determined by supply and demand considerations, as shown by Exhibit I.1.

How did a crisis affect exchange rate movements in 2008–09?

    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.

Do interest rate differentials explain the crisis-related exchange rate movements?

    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.
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