This paper adopts an event-study approach that utilises a combination of the asset pricing model of the exchange rate due to Engel and West (2010) and a state space model to examine the impact of monetary policy shocks on the change of the New Zealand exchange rate. We find evidence to support the “exchange rate puzzle” (ERP) originally coined by Grilli and Roubini (1995). The ERP in the New Zealand context was also found in Wilkinson et al. (2001). Using newer data, the present study is able to account for the role of the recent global financial crisis (GFC) in influencing the nexus between the exchange rate and interest rate. It is found that the GFC had a mediating effect on the ERP, showing the exchange rate responded asymmetrically to monetary policy shocks.