When interest rate increases by FED, then the dollar appreciates. Discuss the previous statement. AND what...

When interest rate increases by FED, then the dollar appreciates. Discuss the previous statement. AND what is its impact on Gold, Bonds prices? (10 lines)

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Abdul-Rahim Taysir

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Expert Solution

Ans:-When the Federal Reserve rises the federal fund rate ,naturally rises interest rate all over the nation's economy.This greater earning attract the investment from foreign investors also.As a result of this is a very strong exchange rate in US dollar.This increasing interest rate see to advantage in foreign trade .The stronger dollar and rate rise should improve US demand for products all over the world,that will rises business profit for national and international companies alike.When the federal reserve increases the federal fund rate offered government such as bonds and bills.The bonds and bills are frequently observed as the safest investment and will experience a equivalent rise in interest rate.And in the case of gold ,while increasing the interest rate may rise USdollar cause gold price lower,because gold is denominated in US dollar,the elements such as equity prices and instability attached with the supply and demand are the real controller of the price of gold.

Rahul Sunny answered 1 year ago

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