Few month ago, I wrote about an article of my dear colleague Arne Breuer an myself about the CDS implied Dollar-Euro exchange rate. Find it here.
Finally, I have made it, to update my data. For the picture below, I have included Cyprus. We know, the data is not that reliable due to the quite illiquid market, however, just to give an idea I show it. And despite these caveats, it becomes obvious, what happened, when Cyprus announced its problems in August 2012. There you firstly see a deviation of the CDS-fx from the actual fx. Yet, the gap closes soon, due to the size of Cyprus and also the re-alignment of the actual exchange rate.