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    Policy rate cut equals currency depreciation? Not always

    Business, TMB Analytics, Published on 06/10/2017

    ยป How does a country's policy interest rate influence the currency exchange rate? Theoretically speaking, when a country's rate of return falls, investors will move their capital to other countries with higher rates of return, causing the local currency to depreciate. But it is possible that a policy rate reduction will lead to a stronger local currency instead. This depends on investors' expectations of future policy rates.

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