Interest rate shifts represent a monetary, policy-based response as a result of economic indicators that assess the health of an economy. Most importantly, they possess the power to move the market immediately as one aspect of a country's fundamentals have now suddenly changed.
Interest rates impact currencies in the following manner: the greater the rate of return, the greater the interest accrued on currency invested and the higher the profit.
1. The total number of options and/or futures contracts that are not closed or delivered on a particular day. 2. The number of buy market orders before the stock market opens.
Therefore, it is a valid strategy to borrow currencies with a lower interest rate in order to buy currencies that have a higher interest rate (This strategy is also known as the carry trade). However there is the risk that currency fluctuation may offset any interest-bearing rewards. If trading on the forex market were this easy, it would be highly lucrative for anyone armed with this knowledge. (Read more about this type of strategy in Currency Carry Trades Deliver.)
