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CFA Level 1
Economics

Impact of Interest Rates on Currency Value

Easy International Economics Exchange Rates

In international economics, exchange rates play a crucial role in determining the value of one currency in terms of another. They can be influenced by various factors, including government policies, economic indicators, and market perceptions. A government may intervene in the foreign exchange market to stabilize or influence its currency's value.

Consider a scenario where Country A's government decides to increase interest rates to attract foreign investment. What is likely to happen to Country A's currency in the foreign exchange market as a result of this action?

Hint

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