When U.S. interest rates are relatively low compared to those of other countries, the U.S. dollar tends to
A) become more popular.
B) appreciate in value.
C) depreciate in value.
D) appreciate then depreciate in value.

Question

Quizplus · Accepted Answer

When U.S. interest rates are relatively low compared to those of other countries, investors and traders are likely to seek higher returns in those other countries, leading to a sell-off of U.S. dollars to buy foreign currencies. This increased supply of U.S. dollars in the foreign exchange market tends to depreciate its value.

When US Interest Rates Are Relatively Low Compared to Those of of Other