US interest rate rises results in an appreciation of the dollar

This is a good example for AS students which illustrates how a change in interest rates can affect the exchange rate. Late on Thursday the US Federal Reserve raised their discount rate - the price at which banks borrow emergency money from the Fed - from 0.5% to 0.75%.

The move was unexpected, and has given rise to plenty of speculation that they will follow this with a rise in their federal funds rate - the benchmark rate at which banks lend to each other and is used to set rates on mortgages and car loans.

That means that currency speculators have bought the dollar heavily, betting on further rate rises and pushing the exchange value of the dollar up to a nine-month high against a basket of other currencies.

http://www.tutor2u.net/blog/index.php/economics/comments/us-rate-rise-causes-hot-flows-of-money/

Will a weaker £ be good for the UK economy?

The following two items suggest that the falling value of the pound is starting to have an impact on exports and imports. The Guardian reports that there has been a big jump in exports on the back of the weaker pound which has triggered a sharp drop in Britain's trade deficit.

http://aquestionofeconomics.blogspot.com/2009/04/signs-that-weaker-pound-is-having.html

Currency fluctuations

BBC site which gives you the latest exchange rates and a time span chart.
http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/13/default.stm