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U.S. Redbook retail sales annualized for the week ending April 3 were 7.6%, compared to 6.9% previously.April 7th - U.S. business equipment orders rebounded in February, indicating that companies are proceeding with investment plans ahead of the potential conflict with Iran. Data released Tuesday by the U.S. Commerce Department showed that orders for non-defense capital goods (excluding aircraft) rose 0.6% in February, compared to economists median forecast of a 0.5% increase. Orders for all durable goods fell 1.4%, primarily reflecting a decrease in aircraft orders. Boeing stated that it received fewer aircraft orders in February compared to the previous month. The durable goods report showed increases in orders for computers, automobiles, metals, and machinery. Economists expect business investment to remain robust this year as companies continue to invest in artificial intelligence and take advantage of more favorable tax terms. Meanwhile, it remains unclear how cautious companies will become due to the potential conflict with Iran.On April 7th, New York Federal Reserve President Williams stated that the impact of the Iran war will push up overall inflation, and the resulting inflationary factors will be directly reflected in overall inflation data. Taking energy factors into account, the inflation rate should be around 2.75%. The current focus is on overall inflation; core inflation has not changed significantly. Tariffs remain an important factor in inflation, and overall inflation is expected to slow later this year. Monetary policy is currently in a favorable position, and a wait-and-see approach is appropriate. Interest rates are currently at a perfectly appropriate level and can be adjusted if necessary. The labor market situation is quite complex, characterized by low hiring and low layoffs.Federal Reserves Williams: I havent spoken with Warsh recently.Federal Reserves Williams: Warsh has a deep understanding of the Feds mission.

How national interest rates affect exchange rate?

Eden

Oct 25, 2021 13:27

All other factors being equal, higher interest rates in a country increase the value of that country's currency relative to nations offering lower interest rates. However, such simple straight-line calculations rarely exist in foreign exchange.

Although interest rates can be a major factor influencing currency value and exchange rates, the final determination of a currency's exchange rate with other currencies is the result of a number of interrelated elements that reflect the overall financial condition of a country in respect to other nations.

Factors in Currency Values

Generally, higher interest rates increase the value of a country's currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country's currency.

Conversely, lower interest rates tend to be unattractive for foreign investment and decrease the currency's relative value.

This simple occurrence is complicated by a host of other factors that impact currency value and exchange rates. One of the primary complicating factors is the relationship that exists between higher interest rates and inflation. If a country can achieve a successful balance of increased interest rates without an accompanying increase in inflation, its currency's value and exchange rate are more likely to rise.


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