Abstract This paper investigates the dynamics in the British Pound (BP), Deutsche Mark (DM), Swiss Franc (SF), and Japanese Yen (JY) futures using Generalized Variance Decomposition analysis over the 1985–2005 period. The results support the interdependence hypothesis against the segregation model with the degree of susceptibility to foreign shocks varying across currencies; internal forces are more dominant for BP and JY, whereas DM and SF are more exposed to external shocks. The results also reveal that SF was tightly linked to the DM before the demise of the latter, whereas it became aligned with the BP afterwards. The inter-currency effects lessened in the post-1987 crash period and then reversed course in the beginning of the new century.