Relationship between federal interest rate and currency?

I don't understand how federal interest rate affects currency. Can you please explain?

here is a line from news article.

The yen has been hurt by market expectations that the Bank of Japan, which has kept interest rates at 0.1 percent, will hold off on raising interest rates for the next year or two in a bid to spur economic growth.

from

http://ca.news.finance.yahoo.com/s/02042%E2%80%A6

Thank you.

2 Answers

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  • Anonymous
    1 decade ago
    Favorite Answer

    If Japanese rates are held low, there is less incentive for non-Japanese investors to put money into yen-denominated investments. That weakens the yen versus other currencies.

  • 4 years ago

    in short words fedral activity value effect remote places money iN the form of trend that it reason DEVALUATION and REVUALTION IN CURENCY ITS A DEEPER theory genuinely yet another inportant element is that uaually no longer remote places money yet remote places money value is disscused with federal rates of activity.

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