My answer was that much depends on the scope that a central bank has to cut nominal interest rates if a country experiences a period of negative consumer price inflation. For example, the policy rate in the UK has remained at 0.5% since March 2009 and the European Central Bank has cut nominal rates to the floor and introduced a huge (albeit delayed) programme of quantitative easing.

If the price deflation is being caused mainly by a chronic lack of aggregate demand - this - combined with falling profitability of businesses pressed to cut their prices - will usually bring about a depreciation of the exchange rate as foreign investors look elsewhere for higher returns.

But deflation might also be caused by falling import prices which for a net importing country could cause their exchange rate to rise

I suppose the answer depends on the circumstances facing each country!

Incidentally - another student also pointed me to this interesting and topical article from the BBC news site on the growing use of negative interest rates in a number of countries.