Exchange rates developments

The intensification of the financial crisis in September 2008 inspired a significant reversal in capital flows, away from developing countries and toward high-income countries, notably the United States. The need to repatriate liquid assets to cover losses elsewhere and an increase in home bias on the part of global investors caused the currencies of almost all developing economies to depreciate against the U.S. dollar (table 1.5). The collapse in commodity prices also played a role in exchange-rate depreciation for developing commodity exporters, such as Argentina, Brazil, and the Russian Federation, and also for high-income commodity exporters such as Australia and Canada. In the immediate aftermath of the crisis, only a few currencies appreciated or held their ground with against the dollar, among them the Chinese renminbi and the currencies of several oil exporters that are pegged to the dollar. For most countries, the extent of depreciation was much less severe in real effective terms—reflecting the fact that most currencies depreciated against the dollar simultaneously.