Interest rates play a significant role in the forex market as they influence currency value and investor behavior. Central banks set interest rates to control inflation and stabilize the economy. When a country’s interest rates are high, it typically attracts foreign capital, leading to an appreciation of its currency due to increased demand. Conversely, lower interest rates can result in currency depreciation as investors seek higher returns elsewhere. Traders closely monitor rate changes and central bank announcements, as even small adjustments can lead to significant currency fluctuations. Understanding the relationship between interest rates and forex markets is essential for predicting currency movements and making informed trading decisions.