Business
jmbotz
2021-02-23 08:53:45
How are interest rates linked to currency fluctuations
ANSWERS
Shelbz3
2021-02-23 10:26:24

Higher interest rates mean that if you invest money in a given currency, you will get a bigger return of this money. So higher interest rates attract people to this currency, especially to place their savings in this currency. This will mean that people will buy this currency: the demand for it will increase, and with an increased demand, the value of the currency will increase. So higher interest rates are a force that will lead to an increase of the value of this currency. Together with other forces that will lead to a decrease of this value, they will lead to a fluctuation in the exchange rate.  

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