Econ Q: interest rate and currency mvmt currency, interest, Because, however, between

LorrinCFA

Hi All,

I'm confused by the relationship between interest rates and currency appreciation/depreciation.

From the text of Reading 19 summary, it says: "factors causing a country's currency to appreciate include lower inflation and higher real interest rates"

however, EOC #1 answer says: 'Because the interest rate in A is greater than the interest rate in B, [A's currency] is expected to depreciate ...]

Is it due to real vs. nominal r??