What implications for international financial repositioning and for the current

Question

What implications for international financial repositioning and for the current spot exchange rate would flow from an increase in the current domestic interest rate?

Repositioning toward domestic currency assets results in the domestic currency depreciating.

Repositioning toward foreign currency assets results in the domestic currency depreciating.

Repositioning toward domestic currency assets results in the domestic currency appreciating.

Repositioning toward foreign currency assets results in the domestic currency appreciating.

Explanation / Answer

Ans: Repositioning toward domestic currency assets results in the domestic currency appreciating.

Explanation:

Increase in the current domestic interest rate will lead to domestic currency appreciating.

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