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If Central Banks in other countries raise their interests rates higher than those of the US Central Bank, with no corresponding move in US interest rates such outside markets will attract capital currently in the US. It is important to note that not only the level of foreign interest rates attracts capital from the US, but also the stability of a countries financial and banking institutions. Investors consider all these factors before moving their money.

Once investors start moving their money/diversifying their investments -- usually because of the abovementioned change in interest rates, and also because of an often generally related worry about the health of the US economy, and/or a greater attraction of foreign countries' markets for a variety of reasons -- the value of the dollar decreases. This leaves an excess of dollars on the currency market, and unless the dollars are purchased its value decreases (for simplicity's sake treat this situation like classic supply and demand-- if there is excess supply without corresponding demand, the price of a good falls). In the real world, this phenomenon may be magnified by petrodollar movement as most oil-producing nations trade oil in dollars; as the dollar looses value (for the abovementioned reasons) oil-producing nations seek to diversify their dollar reserves into different currencies because their profits are smaller if they do not. This further causes a decrease in the value of the dollar.

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