Question: I'm trying to explain in a simple and extensive way how the expected increase or decrease of domestic interest rates in the future might affect

I'm trying to explain in a simple and extensive way how the expected increase or decrease of domestic interest rates in the future might affect immediately the actual nominal exchange rate under interest rate parity condition.

Is it correct to say that, an increase in interest rate on deposits denominated on a particular currency, will increase the rate of return on those deposits. Increasing the Rate of return on those deposits will lead to an appreciation of the currency. So, the exchange rate decrease (means Exchange rate appreciates?) and vice versa.

How can i explain this in a more elaborated way, assuming the interest rate parity needs to be satisfied?

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