If interest rates rise, will the US Dollar become stronger?

Question

In reading through answers to questions, I saw that one answerer stated that if the Fed raises interest rates, it will strengthen the value of the US Dollar. Is this a valid assumption?

Answer 1

Generally yes, but that will also depend upon what happens with foreign interest rates as well. If they rise by a similar amount, the $ will probably stay somewhat static.

A weak $ isn't necessarily a bad thing. It does increase the price of imported goods in the US, but lowers the price of US goods overseas. A weak $ is an excellent opportunity for US companies to increase their foreign market share. A weak $ also makes the US a more attractive destination (at least financially) for foreign tourists since they can buy more $ with their Euros, Pounds, Yen, etc.