How would the hike in interest rates affect the forex market?

<p id="isPasted">When interest rates are increased, it can have a significant impact on the forex market. One key effect is the potential strengthening of the currency. A higher interest rate attracts foreign investors seeking better returns on their investments. As a result, there is increased demand for the currency, driving up its value relative to other currencies. This can lead to a strengthening of the currency in the forex market.</p><p>Furthermore, a higher interest rate increases the yield attraction of a currency. Investors seeking higher returns may be drawn to the currency with the higher interest rate. This increased demand for the currency can further contribute to its appreciation.</p><p>Additionally, a higher interest rate differential between two countries can prompt capital inflows. Traders and investors may shift their investments from lower-yielding currencies to currencies with a higher interest rate. This capital flow can strengthen the currency of the country with a higher interest rate.</p><p>It's important to note that the impact of interest rate hikes on the forex market is not guaranteed and can be influenced by various factors such as market expectations, economic conditions, and geopolitical events. Forex traders closely monitor interest rate decisions and their potential implications to make informed trading decisions.</p>