The strength of a currency is directly related to its interest rate and inflation expectations.

Question

Quizplus · Accepted Answer

When a country has a higher interest rate compared to others, it attracts more foreign investment which in turn increases the demand for its currency and therefore its strength. Similarly, if a country has lower inflation expectations compared to others, it is seen as more stable and attractive for investors, which again strengthens its currency.

The Strength of a Currency Is Directly Related to Its