FX markets’ reactions to COVID-19: are they different?

Walter Bazán-Palomino, Diego Winkelried

Research output: Contribution to journalArticle in a journalpeer-review

10 Scopus citations


In this paper, we empirically investigate the impact of the COVID-19 pandemic on FX markets. We find important differences between COVID-19 and previous high-risk episodes: the Global Financial Crisis, the Swiss National Bank's removal of the Swiss franc/euro floor, and Brexit. Contrary to these episodes, the USD did not show any safe haven characteristics during the pandemic. Furthermore, the estimated volatility and non-parametric value-at-risk of three currency portfolios indicate that COVID-19 was not as risky as previous stressful events. We provide evidence that investors could minimize COVID-19 risk by investing in the Canadian dollar and the Japanese yen, and by reducing their exposure to European currencies.

Original languageEnglish
Pages (from-to)50-58
Number of pages9
JournalInternational Economics
Early online date1 Jun 2021
StatePublished - Oct 2021

Bibliographical note

Publisher Copyright:
© 2021 CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), a center for research and expertise on the world economy


  • Currency portfolios
  • volatility
  • diversification
  • COVID-19
  • Volatility
  • Diversification


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