First of all, when a country's currency exchange rate falls, it will help to promote exports and restrict imports, increase the cost of imported goods, push up the overall price level, cause the domestic price level to rise, and thus lead to a decline in real interest rates. This situation is beneficial to debtors and unfavorable to creditors, which leads to the imbalance between supply and demand of loan funds and eventually leads to an increase in nominal interest rates. If a country's currency exchange rate rises, the impact on interest rates is just the opposite.
Secondly, when a country's currency exchange rate falls, people often expect the currency exchange rate to fall further because of psychological factors. Under the expectation of local currency depreciation, it will cause short-term capital flight, and the reduction of domestic capital supply will push up the local currency interest rate. If people expect the exchange rate to rebound after the local currency exchange rate falls, in this case, the opposite change may occur, that is, the short-term capital inflow increases, and the domestic capital supply increases accordingly, resulting in a decline in the local currency interest rate.
If a country's terms of trade can be improved after its currency exchange rate falls, then the improvement of terms of trade will promote the increase of its foreign exchange reserves. Assuming that other conditions remain unchanged, the increase of foreign exchange reserves means the increase of domestic capital supply, which will lead to the decrease of interest rates. On the contrary, if a country's currency exchange rate rises, it will reduce its foreign exchange reserves, which may lead to a decrease in domestic capital supply, which will affect interest rates and make them rise.