What explains global exchange rate movements during the financial crisis?

A striking and unexpected feature of the financial crisis has been the sharpappreciation of the US dollar against virtually all currencies globally. The paper findsthat negative US-specific macroeconomic shocks during the crisis have triggered asignificant strengthening of the US dollar, rather than a weakening. Macroeconomicfundamentals and financial exposure of individual countries are found to have playeda key role in the transmission process of US shocks: in particular countries with lowFX reserves, weak current account positions and high direct...