What are the effects of national interest rates on currency values? Back to list

Member SinceJul 08, 2021

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Sterling

Sep 22, 2022 a 12:17
National interest rates influence currency values in a variety of ways. The most direct way they accomplish this is by influencing the demand for a specific currency. When a country raises interest rates, it signals to investors that the economy is doing well and that they should invest in the currency of that country. Because of the increased demand, the currency's value will rise. Furthermore, by lowering interest rates, a country is essentially telling investors that it does not believe the economy is doing well and that they should invest elsewhere. Because of the decreased demand, the currency's value will fall.

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