Bilateral real exchange rates are analyzed for fifteen countries over the period 1925-1937, using a benchmark-invariant principal components technique. For the period 1925-1931, half of real exchange rate variation originates from countries on floating exchange rates, and half from price level differences between countries on the gold standard. For the period 1931-1937, real exchange rate movements between the sterling-bloc, the European gold-bloc, and the US and Canada appear dominant. Within bloc variation is secondary and mostly due to competitive devaluations. Our results support earlier evidence that the nominal exchange rate regime to a large extent determines real exchange rate variation. (JEL F31). © 1997 Elsevier Science Ltd.