Question

Q: zero intrest rate may result volatility in currency markets, what may happen to the US dollar vs other currencies in the near future, explain your answers with details necessary

Answer 1

All different variables being equivalent, the higher interest rate in a nation increase the value of that nation's currency comparative with countries offering lower interest rate.

In spite of the fact that loan costs can be a main consideration affecting currency worth and trade rates, the last assurance of a money's exchange rate with different currency forms is the aftereffect of various interrelated components that mirror the general financial state of a nation concerning different countries.

Since, higher interest rate attract larger foreign investment, which will increase the demand for the nations' currency. Similarily, lower interest rate will not be attractive to foreign investors due to lower returns on their lending capital & hence will decrease the value of nations' currency.

One of the essential other factors is the relationship that exists between higher interest rates and inflation. On the off chance that a nation can accomplish an effective balance of increasing loan fees without increase in inflation, its money's worth and conversion scale are bound to rise.

Despite low interest rate, US dollar will have better exchange rates then other nation's currency due to its nature of reserve currency for most of the world. Almost every country in the world keep dollar as a currency reserve for trading with different nations. Having very strong economy US dollar is considered to be a safe haven at times of economic crisis. Due to all this reasons, US dollar enjoy better position in Forex even if the interest rate will decrease in US, which will not be the case with other countries' currencies.