While the Federal Reserve has kept interest rates at historic lows,many foreign central banks have begun to tighten monetary policy by raising interest rates.These actions will
A) weaken these foreign currencies relative to each other.
B) cause the dollar to appreciate relative to these foreign currencies.
C) cause the foreign currencies to depreciate relative to the dollar.
D) strengthen these foreign currencies relative to the dollar.

Question

Quizplus · Accepted Answer

When foreign central banks raise interest rates, their currencies typically strengthen relative to the dollar because higher interest rates attract foreign capital, increasing demand for those currencies.

While the Federal Reserve Has Kept Interest Rates at Historic