Assuming that the international Fisher effect is holding,what will be the effect of an increase in nominal interest rate on the currency?

Question

Quizplus · Accepted Answer

According to the international Fisher effect, an increase in nominal interest rates should lead to a proportional increase in the expected inflation rate. This, in turn, will lead to a decrease in the real interest rate, which should lead to a depreciation of the currency. Thus, an increase in nominal interest rates will likely lead to a depreciation of the currency.

Assuming That the International Fisher Effect Is Holding,what Will Be