Change in interest rate => effect on the exchange rate?

In the short term,

If the interest rate is low relative to other countries, international investors will be less inclined to invest money in that country. Thus decreasing the demand for domestic currency and tends to decreases the exchange rate. This may lead to cost-push inflation.
Vice versa.
Note, the household will not but the currency when its high, rather, if they have investment on it before, they would sell them to earn a profit when they buy it low.

In the long term,

By expectations theory, long term interest rates are largely determined by investors' expectations of future short term interest rates.

Actually, exchange rate is affected or influenced by the performance of the economy comparing to the others. i.e. US Dollars vs. Euro compares the economy of USA vs. European Union Countries.
Exchange rate is also a forward rate of different currencies based on their intereste rate.
In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 123 Japanese yen (JPY, ) to the United States dollar (USD, $) means that JPY 123 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 2 trillion USD worth of currency changes hands every day.
The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.






Contents[hide]

1 Quotations
2 Free or pegged
3 Nominal and real exchange rates
4 Uncovered interest rate parity
5 Balance of payments model
6 Asset market model
7 Fluctuations in exchange rates
8 Foreign exchange markets
9 See also
10 References
11 External links