Interest rate have been at their historic lows in japan, Europe, and North America for several
years but they are beginning to inch up in some economies. What are the exchange rate
implications for American companies operating abroad in 2015 and beyond?
Solution
Interest rates and exchange rate share positive relationship. It means higher interest rates causes
an appreciation in exchange rate. Since the interest rates started inching up in America,
American dollar will get a boost and it will rise up. This appreciation in US dollar will detriment
American companies working abroad as in dollar terms they will now get a lower amount of
money as the currency they are operating ( If operating in India, operating currency will be
rupee), has been depreciated and this and they will get less dollar if converted ..
Interest rate have been at their historic lows in japan, Europe, and.pdf
1. Interest rate have been at their historic lows in japan, Europe, and North America for several
years but they are beginning to inch up in some economies. What are the exchange rate
implications for American companies operating abroad in 2015 and beyond?
Solution
Interest rates and exchange rate share positive relationship. It means higher interest rates causes
an appreciation in exchange rate. Since the interest rates started inching up in America,
American dollar will get a boost and it will rise up. This appreciation in US dollar will detriment
American companies working abroad as in dollar terms they will now get a lower amount of
money as the currency they are operating ( If operating in India, operating currency will be
rupee), has been depreciated and this and they will get less dollar if converted .
