Suppose the foreign interest rate rises. Other things equal, what happens to the domestic currency?

Name: Suppose the foreign interest rate rises. Other things equal, what happens to the domestic currency?
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Question

Quizplus · Accepted Answer

When the foreign interest rate rises, investors are likely to shift their investments to that country to gain higher returns, increasing demand for the foreign currency and decreasing demand for the domestic currency, leading to its depreciation.

Suppose the Foreign Interest Rate Rises