Current account and exchange rates

I have read that a current account deficit in theory should weaken a currency because a deficit means that the country is importing more goods and services than they are exporting which means that there is a lower demand for the currency. But I have also read that a current account deficit is financed by a surplus on the capital account.

Why should a current account deficit have an effect on the exchange rates when it is financed by an equally large surplus on the capital account?

What does interest rates have to do with the current account? I don't see a connection between the two.

yes you are balancing the the current account deficit with capital account.

But that does not take away the pressure on your exchange rate that you created when you imported more than you exported because when you balanced the current account with capital account you did not exchange any ccy i.e you just subtracted a fig from one account and added it to the other, wearing thick lens glasses somewhere in a gov office.
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Countries running a current account deficit need to pay for it with capital account surpluses, as has been explained. Increasing interest rates is an attempt to attract capital. Therefore countries with a trade deficit generally have higher interest rates than countries with trade surpluses, attempting to boost capital income to cover the current account shortfall.

Switzerland and Japan, who almost always have large trade surpluses, in theory should have the lowest interest rates. USA and Great Britain, who generally have large trade deficits, in theory should have the highest interest rates.

Of course this relationship is a loose one, current account balances are just one of the many factors putting pressure on interest rates - in a recession this relationship usually breaks down as the need to get cash circulating is seen as more important than bringing more capital in.

But should't a higher interest rate strenghten the currency? Higher interest rates means less money are created and more attractive to own because of the higher yield(carry trades). And why would the central bank change interest rates to attract capital? The job of a central bank is to maintain price stability.

Maintaining price stability is the usually their main role, but each central bank has its own mandate - price stability is the one and only purpose of the SNB but the RBA also targets full employment and long term prosperity. They all act with different goals in mind and all have different tools available to them.

You are right in that higher interest rates eventually strengthen the currency making the current account situation even worse, which is one of the main reasons for interest rate cycles. I should have said that attracting capital is just one of the reasons to raise interest rates. A current account deficit combined with a capital account deficit obviously isn't sustainable, and long term will have an even greater effect on price instability. It is usually assumed that capital inflow via higher rates will outweigh the effects of currency appreciation, at least in the short term.

Again keep in mind that this doesn't happen in a vacuum. This is just a small piece of a very large puzzle in which all the pieces are constantly reacting to each other in sometimes unpredictable ways.