Why do price of exchange rates increase when interest rates increase? What does it mean that a currency is strong?

When the interest rate is high in a country it encourages investors to convert their money, e.g. into pounds, and invest their money in the country. The price change can be traced back to basic supply and demand. When there is a high demand for the currency the price of it increases. Now if a lot of people from Hungary convert their forint into pound, the price of pound will increase and the pound will become stronger against other currencies. It means that when you originally could buy 300 forints with one pound, now you can buy 310 forints with the same amount. If we switch the sides, we will be able to buy less pounds for the same amount of forints when the pound is getting stronger. 

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Answered by Bence L. Economics tutor

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