With floating exchange rates, the dollar will depreciate against the Swiss franc if a tight monetary policy in Switzerland causes its interest rates to rise relative to those in the U.S.

Question

Quizplus · Accepted Answer

A tight monetary policy in Switzerland that raises interest rates relative to those in the U.S. will attract investors to Swiss franc-denominated assets for higher returns, increasing demand for the franc and causing the dollar to depreciate against it.

With Floating Exchange Rates, the Dollar Will Depreciate Against the Swiss