In general, interest rate cuts lower a currency's value because they reduce the returns available from investments denominated in that currency.

Higher rates abroad draw money away from investments denominated in dollars, including Treasury bonds.

This would make investments denominated in Japanese yen and West German marks seem more valuable.

But lower rates hurt the dollar's value by making investments denominated in the currency worth less.

Lower rates would make investments denominated in marks less attractive.

For foreign investors, a weaker dollar makes investments denominated in the currency less attractive.

But lower interest rates in those countries make investments denominated in their currencies less attractive to international investors.

The dollar tends to fall when interest rates rise in another country, as emand increases for investments denominated in that country's currency.

But because the dollar has fallen 10 percent against Japan's currency, investments denominated in yen are now worth a lot more greenbacks.

Lower interest rates are bad news for the dollar because they reduce the yield on investments denominated in dollars.