http://www.myylt.com/2009/12/01/what-is-the-correlation-between-federal-interest-rates-and-the-value-of-the-currency/ Discussion of Forex Trading and Currency Trading Wed, 23 May 2012 14:36:04 +0000 http://wordpress.org/?v=2.3.3 http://www.myylt.com/2009/12/01/what-is-the-correlation-between-federal-interest-rates-and-the-value-of-the-currency/#comment-20341 Michelle B Tue, 30 Nov 1999 00:00:00 +0000 http://www.myylt.com/2009/12/01/what-is-the-correlation-between-federal-interest-rates-and-the-value-of-the-currency/#comment-20341 Hypothetically, the correlation should be positive and high. if the FED raises the rate, the dollars will be stronger. Hypothetically, the correlation should be positive and high. if the FED raises the rate, the dollars will be stronger.

]]> http://www.myylt.com/2009/12/01/what-is-the-correlation-between-federal-interest-rates-and-the-value-of-the-currency/#comment-20342 AdamL Tue, 30 Nov 1999 00:00:00 +0000 http://www.myylt.com/2009/12/01/what-is-the-correlation-between-federal-interest-rates-and-the-value-of-the-currency/#comment-20342 If interest rates are lowered, then the money supply expands. Banks lend more, and there is more money in circulation. When more money is chasing the same amount of goods and services, this causes inflation (a rise in prices). If the same goods and services cost more, this means that the currency is worth less. Thus, lower interest rates mean a currency that's worth less, and higher interest rates increase the value of a currency, because they take dollars out of circulation (fewer dollars chasing the same amount of goods and services). If interest rates are lowered, then the money supply expands. Banks lend more, and there is more money in circulation. When more money is chasing the same amount of goods and services, this causes inflation (a rise in prices). If the same goods and services cost more, this means that the currency is worth less. Thus, lower interest rates mean a currency that’s worth less, and higher interest rates increase the value of a currency, because they take dollars out of circulation (fewer dollars chasing the same amount of goods and services).

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