Interest rates decision

Ok my question is, if there is an interest rate increase in say the USD, would this be dollar negative ro positive?

In other words if the US increased interest rates would the GBPUSD chart go up or down. Up obvioulsy meaning bad for the dollar and down meanign good for the dollar.?

My currecnt understanding is that an increase in interest rates is bad for the dollar. Am i correct in that belief?

No, an interest rate hike is good for a currency. In simple terms it means that the currency has more value since you can own it and get paid higher interest. It sure is bad for people borrowing money in that currency.

GBP/JPY is a flashy example. Carry traders look to sell the Yen (low interest) and buy the Pound (high interest rates).

Hope I made it a little bit clearer.
S

Look at the first currency...ie GBP/USD if the rates go up in USA then the ratio between GBP and USA gets wider.

So by selling £ and buying $ .......you would earn more interest in an American bank...........so you end up with £ going down..........(remember frations ??) and the other side going up.......$

GBP/USD would go down ie short the pair

The reason y i asked was because on jan 31 2006. the US raised int reates from 4.25 to 4.5. On the GBPUSD chart it acutally went up. Could someone care to explain why that happened?

There is so much more to the markets. A raise in rates would imply a stronger currency sure, BUT the hike might have been priced in, the market might have been focusing on different themes and only used the hike as a catalyst. You can't view any one event in isolation.