How Interest Rates Shape Currency Value: Exchange Rates Explained

Why do interest rates impact currency value? And how do central banks influence exchange rates? Whether you're studying for your A-Level, IB, or GCSE Economics exams, this video will break down the key concepts you need to know!

In this session, Geoff Riley, Co-Founder of Tutor2u, explains:

✅ Why do higher interest rates strengthen a currency?

✅ Why do lower interest rates weaken a currency?

✅ How do investors respond to interest rate changes?

✅ What is the ‘carry trade’ and why does it impact global currency markets?

✅ Short-term vs. long-term effects of interest rate policy on exchange rates

💡 Key examples included! Learn how Japan’s ultra-low interest rates affect the Yen, why the US Dollar strengthens when the Federal Reserve raises rates, and how the Euro responds to ECB policy changes.

📌 Perfect for Economics revision, macro & micro topics, and understanding exchange rate movements in the real world.