{
  "title": "The Behavior of Currencies during Risk-off Episodes",
  "publication": "IMF Working Papers, January 11, 2013",
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  "summary": "Episodes of increased global risk aversion, also known as risk-off episodes, have become more frequent and severe since 2007. During these episodes, currency markets exhibit recurrent patterns, as the Japanese yen, Swiss franc, and U.S.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Episodes of increased global risk aversion, also known as risk-off episodes, have become more frequent and severe since 2007.\n- During these episodes, the Japanese yen, Swiss franc, and U.S. dollar appreciate against other G-10 and emerging market currencies.\n- The pattern of currency moves during risk-off episodes can be explained by a combination of:\n  - fundamental factors (nominal interest rate, international investment position, measures of exchange rate misalignment), and\n  - market-liquidity factors (bid-offer spreads, restrictions on international capital flows).\n- Currency performance in a risk-off episode has become more related to a currency’s yield and relationship to broader risks in recent years."
    },
    {
      "heading": "Key findings",
      "content": "- Safe-haven appreciation: The Japanese yen, Swiss franc, and U.S. dollar exhibit recurrent appreciation versus other G-10 and emerging market currencies during risk-off episodes.\n- Increasing frequency/severity: Risk-off episodes have become more frequent and severe since 2007.\n- Drivers of currency moves:\n  - Fundamental drivers identified include the nominal interest rate, the international investment position, and measures of exchange rate misalignment.\n  - Market-liquidity drivers identified include bid-offer spreads and restrictions on international capital flows.\n- Evolving determinants: In recent years, a currency’s yield and its relationship to broader risks have become more important predictors of performance during risk-off episodes."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Balance of payments, Central bank policy rate, Currencies, Current account balance, Depreciation, Exchange rates, Financial services, Foreign exchange, Money, National accounts\n- Keywords: Africa, Central bank policy rate, Currencies, currency, currency risk factors, currency weakness, Current account balance, Depreciation, exchange rates, Global, mean reversion, Mexican peso, New Zealand dollar, risk-off episode, Risk-off Episodes, safe haven currencies, U.S. dollar, Ukrainian hryvnia, WP\n\n---\n\n Content in this bundle\n\n- wp1308\n  - wp1308 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1308 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-behavior-of-currencies-during-risk-off-episodes-40233"
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    "Authors: Reinout De Bock, Irineu E de Carvalho Filho",
    "Published: January 11, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781557755308.001",
    "Episodes of increased global risk aversion, also known as risk-off episodes, have become more frequent and severe since 2007.",
    "During these episodes, the Japanese yen, Swiss franc, and U.S. dollar appreciate against other G-10 and emerging market currencies.",
    "The pattern of currency moves during risk-off episodes can be explained by a combination of:",
    "Currency performance in a risk-off episode has become more related to a currency’s yield and relationship to broader risks in recent years.",
    "Safe-haven appreciation: The Japanese yen, Swiss franc, and U.S. dollar exhibit recurrent appreciation versus other G-10 and emerging market currencies during risk-off episodes.",
    "Increasing frequency/severity: Risk-off episodes have become more frequent and severe since 2007.",
    "Drivers of currency moves:",
    "Evolving determinants: In recent years, a currency’s yield and its relationship to broader risks have become more important predictors of performance during risk-off episodes.",
    "Subject: Balance of payments, Central bank policy rate, Currencies, Current account balance, Depreciation, Exchange rates, Financial services, Foreign exchange, Money, National accounts",
    "Keywords: Africa, Central bank policy rate, Currencies, currency, currency risk factors, currency weakness, Current account balance, Depreciation, exchange rates, Global, mean reversion, Mexican peso, New Zealand dollar, risk-off episode, Risk-off Episodes, safe haven currencies, U.S. dollar, Ukrainian hryvnia, WP",
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