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Interest rates and foreign exchange rates

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Discuss how the United States exchange rate would react to the nominal rates, and the real interest rate.

100 words or more

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The government influences nominal interest rates through fiscal policy and monetary policy. When the nominal interest rate increases there are more savings by the people, and businesses tend to invest less. However, domestic assets become more attractive and foreign funds flow in to invest in the United States. This ...

Solution Summary

Impact of interest rates on US foreign exchange rate is explained in a structured manner in this response. The answer includes references used.

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Mr. Swanson has expressed confusion about how foreign exchange rates will affect Content Cow Dairy if it expands to international markets. You tell Mr. Swanson that he has raised a good question and that you will draft and send him a report with information on this topic.

In your report, include the following:

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- Briefly introduce other factors that influence exchange rate fluctuations. Address whether any of these are a factor when looking at the future exchange rate between the United States and Egypt.

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