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Foreign exchange rates and U.S. interest rates

Suppose the Federal Reserve Bank of the US unexpectedly raises interest rates in the US. How do you think this will impact the foreign-exchange market?

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The foreign exchange markets would have to approach buying the dollar and any currency that rates itself against the dollar with a more cautious eye. The price of the dollar would most likely rise as long as inflation was kept in check, but the ...

Solution Summary

A discussion on the affects of changes in the interest rates in the U.S. on the foreign exchange markets.