Abstract

 
 
 This paper examines the effect of Covid-19 on currency exchange rate behaviour by taking a sample of 37 countries over a period from 4th January 2020 to 30th April 2021. Three variables, such as daily confirmed cases, daily deaths, and the world pandemic uncertainty index (WPUI), are taken as the measure of Covid-19. By applying fixed-effect regression, the study documents that the exchange rate behaves positively to the Covid-19 outbreak, particularly to daily confirmed cases and daily deaths, which implies that the value of other currencies against the US dollar has been depreciated. However, the impact of WPUI is insignificant. On studying the time-varying impact of the pandemic, the study reveals that the Covid-19 has an asymmetric impact on exchange rate over different time frames. Further, it is observed that though daily confirmed cases and daily deaths show a uniform effect, WPUI puts an asymmetric effect on the exchange rate owing to the nature of economies.
 
 
Highlights
It was 31st December 2019 when the World Health Organization (WHO) became aware of the spread of pneumonia-like disease in the Wuhan city of China
In our attempt to examine the effect of Covid-19 on exchange rate, the study reveals that daily confirmed cases and daily deaths positively affect the exchange rate
The study demonstrates an asymmetric effect of Covid-19 in terms of daily confirmed cases, daily deaths, and world pandemic uncertainty index (WPUI) on exchange rate owing to the time, where the impact of daily confirmed cases is more pronounced in the first phase than the later phases
Summary
It was 31st December 2019 when the World Health Organization (WHO) became aware of the spread of pneumonia-like disease in the Wuhan city of China. On 7th January 2020, the Chinese authority identified such a disease as Novel Corona Virus (Covid-19). The effect of the virus has been severely felt by countries such as China, France, Russia, South Africa, Brazil, Italy, India, the United Kingdom, Spain, and the United States. Though the world has witnessed many epidemics like the Plague, Ebola, Zika, Lassa fever, etc., the scale and growth speed of Covid-19 makes it unique among them. WHO has termed it the most severe pandemic in the last 100 years, and in line with this, Gates (2020) termed it “the once-in-a-century-pathogen”
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