Interest rates, inflation and exchange rates are all highly correlated. By manipulating interest rates, central banks exert influence over both inflation and exchange rates, and changing interest rates impact inflation and currency values. Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise. The impact of higher interest rates is mitigated, however, if inflation in the country is much higher than in others, or if additional factors serve to drive the currency down. The opposite relationship exists for decreasing interest rates - that is, lower interest rates tend to decrease exchange rates.
Check out our world interest rate table http://www.currencyuk.co.uk/world_interest_rates.php
Posted in Daily Market News on May 30 2014
Fear is gripping global financial markets this morning with one trader summing up the chaos as a ‘US versus Europe ugly contest’. In one corner you have the US with political squabbling, spending cuts and very poor economic readings and in the other you have Europe with slowing growth, high...VIEW FULL ARTICLE
Posted in Daily Market News on Aug 3 2011 by alex