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Week 5 Discussion Foreign Exchange - If America has the...

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Do a little research about foreign exchange traders. It's a big business, how do they make money? What is the relationship between FX rates and interest rates? (required; graded) TCO F Applied According to the article below changes in interest rates can have play an extreme role on the changes in foreign exchange rates. The example explains that investors will want to buy bonds that have a higher interest rate.
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Unformatted text preview: If America has the higher interest rate, the investors will have to purchase the bonds in U.S. dollars on the foreign exchange market which will result in a decrease in the supply of American dollars and a rise in the value to other currencies. There will then be times when the interest rates and the exchanges rates move in the same direction. Source: http://economics.about.com/cs/money/l/aa022703g.htm...
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