Interest rate differentials and exchange rates full of mistakes
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Now, the theme this time isInterest rate differentials and currencies.
The interest rate gap between the United States is gradually widening.
In a textbook sense, the currency of the United States with higher interest rates would be bought.
In other words,Interest rate differential → Exchange rateis the relationship.
However, this interpretation may be correct yet wrong.
There are two currencies.
The U.S. dollar and the yen.
The yen is appreciating.
In other words, there is not much demand for the dollar.
So, I decided to add a little extra to the U.S. dollar.
Interest rates, that is.
Pasting extra with unsold products is easy to imagine as a selling tactic.
With this kind of thinking,Exchange rate → Interest rate differentialwill be the result.
In other words, the causal relationship reverses.
When fiscal collapse or other events erode confidence in the dollar, the causality actually reverses.
Analysts' one-sided interpretations should be questioned.
To that end, let's continue to strengthen our financial literacy.
Note) The above is my personal view and is intended solely to improve financial literacy. Therefore, it was not created for investment solicitation. Also, while the blog content is based on data from reliable sources, the administrator does not guarantee its accuracy. Please make actual investment decisions at your own risk.
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