This paper investigates the relationship between the failures of nominal anchor exchange rate policy and the degree of currency substitution. Following Végh (1995) we set up a transaction-based monetary model with currency substitution in which the foreign and domestic currencies both provides liquidity services to reduce transaction costs. The main reason for failure in enforcing the nominal anchor exchange rate is that the current account does not satisfy the intertemporal balance constraint. In order to delay the currency crisis, the nominal anchor exchange rate policy must have a great regard for the degree of currency substitution. When the degree of currency substitution is high, the monetary authority can greatly reduce the rate of devaluation of domestic currency. On the other hand, when the degree of currency substitution is low, the monetary authority should reduce the rate of devaluation of domestic currency as little as possible.