FX Essential Information: Exchange Rates and Interest Rate Differentials 2022/06/15
Essential information for those watching the exchange rate.
The rate is determined by supply and demand, but the major factor driving supply and demand is the interest rate differential.
The relationship between the exchange rate and the interest rate differential is the most important and fundamental aspect for FX.
It is necessary to constantly grasp that situation.
That relationship is not permanent. It often changes form.
Regularly, we follow information about that relationship.
As we entered June, the dollar has been moving higher rapidly.
The backdrop is that expectations that inflation will subside in the United States have not solidified, and expectations have grown that both the magnitude and speed of rate hikes will increase.
Below, we present the regular graphs (USD/JPY, EUR/USD, GBP/USD, AUD/USD and the correlation with their respective interest rate differentials).
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