What is the affect of inflation on a currency?

To a professional trader, the answer to this question is obvious.  But to a beginner, there may not be an easy answer.

Inflation is said to be watched very closely by all in the
financial community and that is why we should all know the answer to
this question.

The method of choice for fighting inflation is
raising interest rates, and higher interest rates tend to support the
local currency.   Knowing this, will the Fed continue to
raise US interest rates to control inflation caused by high oil prices?
I don’t know the answer to this but most likely this question has been
pondered and priced into currency prices already.  We have to wait
for furthur language from someone important before the currency is
priced accordingly.  This language may come tomorrow when Federal
Reserve Governor Donald Kohn speaks about globalization and inflation,
in Wooster, Ohio.  This is scheduled to occur at 7:30 p.m. E.S.T.
Tuesday, October 10th.

Popularity: 1%