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mitch44 mitch44
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How do changes in interest rates affect exchange rates?
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Macroeconomics

Macroeconomics


Edition: 3rd
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Changes in interest rates affect the value of a country's currency with respect to other currencies. When the interest rate in an economy increases, investors want to invest in the economy. This increases the demand for the domestic currency, causing it to appreciate against other currencies in the foreign exchange market. In contrast, when interest rate decreases in an economy, the country's currency depreciates.
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