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bchadwick

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tT
发表于 2011-7-13 16:44 | 只看该作者

Short-term (1-month) government rate

interest, currency, government, expect, question
Curriculum volume 3, page 118, question 18.

Why would we expect to see a strengthing currency in UK since its Short-term (1-month) government rate is higher?

It looks to me that higher interest rate will make the currency depreciated, according to Interest Rate Parity.
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wake2000

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发表于 2011-7-13 16:44 | 只看该作者
high interest rate will attract capital that seeks here ROI, increasing demand for currency, which increases Fx. I think you're confused with inflation.

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Unforseen

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发表于 2011-7-13 16:44 | 只看该作者
This is from L2 (maybe L1 even). PPP only works in the long term.

NO EXCUSES

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