How are interest rated and currencies correlated? For example, if the RBA keeps rates unchanged, how does that affect the currency? If rate is raised, etc.? Thanks for any help in understanding this.
In economic theory, if the interest rates in one country increase, then the currency value of that country will increase as a reaction. If the interest rates decrease, then the opposite effect of depreciating currency value will take place. Thus, the central bank of a country might increase interest rates in order to "defend" the local currency by causing it to appreciate in value in respect to foreign currencies.
thank you for the fast response. I understand the concept now. With the Aussie/USD in decline week after week one would think rate would be raised then. I guess we shall see. Thanks again.
thank you for the fast response. I understand the concept now. With the Aussie/USD in decline week after week one would think rate would be raised then. I guess we shall see. Thanks again.
Ignored
Not necessary. Sometimes the govt wants a weak currency. Helps export etc. A few months ago RBA said AUD was too high.
