#FedRateCutAffectsDollarTrend Dollar Trends with Fed Rate Changes 1. When the Fed Raises Interest Rates • The U.S. dollar strengthens because higher rates attract foreign investors seeking better returns on U.S. assets. • Capital inflows increase, boosting demand for the dollar. • Inflation may slow, but borrowing costs rise, impacting economic growth. 2. When the Fed Lowers Interest Rates • The U.S. dollar weakens because lower rates make U.S. assets less attractive to investors. • Capital outflows may increase as investors seek higher returns elsewhere. • Lower borrowing costs stimulate economic growth but can lead to inflation if excessive. Key Takeaway • Higher Fed rates → Stronger dollar (due to higher yields on U.S. investments). • Lower Fed rates → Weaker dollar (due to reduced investor demand for U.S. assets). • Other factors, like global economic conditions and geopolitical risks, can also influence dollar trends.