Inflation rates impact a country’s currency value

[Tobi]

Inflation Rates : Inflation rates impact a country’s currency value. A low inflation rate typically exhibits a rising currency value, as its purchasing power increases relative to other currencies. Conversely, those with higher inflation typically see depreciation in their currencies compared to that of their trading partners, and it’s also typically accompanied by higher interest rates.

Interest rate : Exchange rates, interest rates and inflation rates are all interconnected. An increase in interest rates cause a country’s currency to appreciate, as lenders are provided with higher rates and thereby attracting more foreign capital. This can cause a rise in the value of a currency and therefore the exchange rate. Cutting interest rates, on the other hand, can lead to depreciation of the currency.

 

[Starmix]

That's the usual picture when the rate of inflation is extreme. Currencies worldwide are affected. Our Ph government, invited many investors to reduce the inflation. President Marcos has able to reduce the inflation rate consistently at 2.0%.

 

[Suba]

In fact, not all inflation will necessarily have a significant negative impact on a country's currency. This primarily depends on the severity of the inflation rate. If it's very mild, below 5%, the currency will weaken and people's purchasing power will only decline slightly. Investors will also not immediately withdraw funds from a country where they have invested, and the currency exchange rate will also decline slightly compared to countries without inflation.

 

[King Belieal]

Inflation affects the value of money which in turn would affect the demand of the currency making it to crash against other international currencies.

 

[Augusta]

increased inflation reduces the currency's buying power, which weakens it against other currencies. The impact of increasing inflation on currency conversion rates is usually downwards