If a nation's interest rates are relatively high compared to those of other countries, then the exchange value of its currency will tend to

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If a nation's interest rates are relatively high compared to those of other countries, then the demand for its currency on the foreign exchange market will tend to increase, which will lead to an appreciation of its currency under a system of floating exchange rates. This is because investors will want to invest in assets denominated in this currency to earn higher returns, increasing the demand for the currency and pushing up its value. Under a system of fixed exchange rates, the central bank would need to intervene by buying or selling its own currency to maintain the fixed exchange rate.

If a Nation's Interest Rates Are Relatively High Compared to Those