Interest rates on Treasury bonds should influence the decision of foreigners to purchase currency in order to buy them. In this case, higher interest rates attracts capital from abroad and the currency should appreciate. Decisive would be the difference between domestic and foreign interest rates, thus a reduction in interest rates abroad would have the same effects.
Similarly other fixed-interest financial instruments could be object of the same dynamics. Accordingly, an increase of domestic interest rates by the central bank is usually consider a way to "defend" the currency.
Nonetheless, it may happen that foregners rather buy shares instead of Treasury bonds. If this were the strongest component of currency demand, then an increase of interest rate may even provoke the opposite results, since an increase of interest rate quite often depresses the stock market, favouring a tide of share sales by foreigners.
In the same "inversal" direction might foreign direct investments work. A restrictive monetary policy usually depresses the growth perspective of the economy. If FDI are mainly attracted by sales perspectives and they constitute a large component of capital flows, then FDI inflow might stop and the currency weaken.
Needless to say, those conditions are quite restrictive and not so usually met.
As a temporary conclusion, interest rates should have an important impact on exchange rate but one has to be careful to check additional conditions.
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