They Said Rates Are Dropping: So What’s Up With the Exchange Rate Lately, Seriously?
Everyone was making a big fuss expecting rate cuts, but I don’t get why the exchange rate is swinging around like this. As someone holding export stocks, it’s both a good thing and kind of ambiguous.
In the end, I’ve concluded that neither exchange rates nor interest rates are areas I can predict. I guess diversification is just the answer.
6 answers
Agreed, exchange rates are truly unpredictable... I guess diversification is just the answer.
Textbook-wise, it’s true that when interest rates fall, the dollar weakens, but in reality it’s tied to U.S. rates, so you can’t get it right by looking only at our rates. Just look at last year, when rate-cut expectations were priced in early and then reversed... For exchange rates, it’s better to just watch U.S. indicators.