Central banks typically respond to weakening currency values by using a combination of higher domestic interest rates and foreign exchange market intervention. Higher real interest rates tend to lead to an appreciation of the currency. This is because high-interest rates mean saving in that country gives a better return. Therefore investors often move funds to countries with [...]
Interest rates decisions are the most prominent factors that cause movements in the financial markets. Without changes in interest rates, trading in the financial markets could be boring and, maybe, less profitable. Traders often pay attention to interest rate decisions to determine their effect on the value of currencies in the forex market and other [...]
The exchange rate between two currencies is determined by the interaction of several variables. Some variables have more influence on the determination of currency rates than the others. One such variable is the interest rate. In general, changes in the interest rate create huge fluctuations in the value of all currencies. In fact all major currency [...]
