Fixed Rate Investments
May 29th, 2010
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How does an interest rate hike effect exchange rate?
If interest rates are hiked that means that fixed deposit Investments are now more attractive in ‘our’ country and hence people will demand our currency and sell their currency meaning our currency should appreciate.
But does this happen in theory because int rate hikes also can effect the stock market negatively as companies will have to pay more for current debt and hence foreigners might withdraw their money from the country…
So would the overall effect on average be an appreciation, neutral or unknown?
Thanks
interest–effect rateļ¼0.134
Fixed Income Investments – Bonds