evertyime the fed cut intererst rates, the value of the dollar goes up or down..and why?

Answer 1

The value decreases when the rates are cut because foreign investors cannot make as much money on the US currency investments (interest rates) so they sell dollars and the value of the dollar goes down relative to other currency.

A lower value in currency makes imports more expensive, but it does help Microsoft sell its products for larger margins in the rest of the world. You should buy Microsoft in this environment.

Answer 2

It goes down. Lessening the interest rates makes loans cheaper. So how does that help? The idea is that the more affordable loans are, the % of entities who can afford them increases. So more borrow money, and end up spending it on something. So reducing interest rates, increases the amount of available cash into the market.

Answer 3

down. loosening of monetary policy means that there are now more dollars in circulation. all else equal, an increased supply in a normal good leads to a decrease in its equilibrium price.



Skeptic: you have an endogeneity problem in your first paragraph. Your second paragraph is absurdly simplistic and pedestrian.