Interest rate, also known as interest rate or interest rate, refers to the ratio of interest amount to principal in a certain period of time, usually expressed as a percentage, which is called annual interest rate if calculated on an annual basis. The monthly interest rate is called the monthly interest rate. There are three relationships between bonds and interest. The first case is long-term bonds, whose bonds fluctuate in the opposite direction to interest rates. The second situation is the price of national debt, which is less affected by changes in interest rates. Because the repayment period of this bond is short, the national debt can be paid off quickly in this short time, or the old bond can be replaced by new bond in a short time. The third situation is short-term interest rate. The greater the fluctuation of interest rate, the smaller the impact on bond prices.

1. When the local currency interest rate rises, credit will be tightened, loans will be reduced, investment and consumption will be reduced, and prices will fall. To a certain extent, it will restrain imports, promote exports, reduce foreign exchange demand, increase foreign exchange supply and lower foreign exchange rate. At the same time, when a country's local currency interest rate rises, it will attract international capital inflows, thus increasing local currency demand and foreign exchange supply, making the local currency exchange rate rise and the foreign exchange rate fall. The decline of local currency interest rate, the expansion of credit, the increase of money supply, stimulate investment and consumption, and push up prices, which is not conducive to exports and is conducive to imports. In this case, it will increase the demand for foreign exchange, promote the rise of foreign exchange rate and the decline of local currency exchange rate. At the same time, when the local currency interest rate drops, it may lead to international capital outflow, increase foreign exchange demand, reduce the balance of payments surplus, and promote the rise of foreign exchange rate and the decline of local currency exchange rate.

2. The impact of exchange rate changes on the local currency interest rate is indirect, that is, it indirectly affects the local currency interest rate by affecting the domestic price level and short-term capital flows. 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 general price level, cause the domestic price level to rise, and thus lead to a decline in the real local currency interest rate. This situation is beneficial to debtors and unfavorable to creditors, which leads to the imbalance between supply and demand of loan capital and eventually leads to the rise of nominal local currency interest rate. If a country's currency exchange rate rises, the impact on the local currency interest rate is just the opposite of the above situation.