If U.S. interest rates are rise relative to foreign interest rates, in the foreign exchange market the demand for U.S. dollars will decrease.

Question

Quizplus · Accepted Answer

When U.S. interest rates rise relative to foreign interest rates, it typically makes dollar-denominated investments more attractive, increasing the demand for U.S. dollars as investors exchange their currency for dollars to invest in the U.S.

If US Interest Rates Are Rise Relative to Foreign Interest Rates