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where do the interest rates come from in currency (forex) pairs?

ive found this interesting, but cannot find the information. It would be beneficial so I can compare values of what the market prices the currency and the direction the interest rates are heading. All of that affects the value of the currencies respectively. In regards to the question, can someone informed answer this? I am looking at data history from central banks of Canada and other countries on their respective websites. All of this information helps me with a school research project on the Forex Market. Is it the bank rate? What is that? the bank rate is the rate for Canada.. right? see http://www.bank-banque-canada.ca/cgi-bin/famecgi_fdps for the Canada Central Bank.

Public Response to where do the interest rates come from in currency (forex) pairs?

1. "Each country has its primary interest rate that is set by the country’s central bank. In the U.S. it called the Federal Funds Rate.As the country’s interest rate rises, the value of the country’s currency tends to follow. Reason: A currency that is paying a high rate of interest is more desirable to own. Simply because it pays you more for holding it.Also, a rising interest rate indicates that the economy is growing so fast that it needs to be reigned in." http://www.rfsfundinginsights.com/forexcurrencytradingprimer.html The governments of each country manipulate their money supply to control interest rates to a certain target rate. In the United States, the rate was recently lowered from about 4.5% to 3.0% after staying at the former for quite some time to combat economic slowdown. This means that dollar denominated US gov't bonds will now yield less, and therefore it is less desireable to own US currency which is needed to buy these bonds. All other US bonds follow this risk free rate with the gov't bonds yielding the least because they pose the least risk. If you sell a currency with a low interest rate and use that money to buy another currency with a higher rate, you will make money assuming the exchange rate does not change before you exchange back into the original currency. Trouble is that higher interest rates are often in place to curb inflation which tends to devalue a currency, which is where the risk lies. Hope that helps a little.