PioneerHow do interest rates affect the exchange rate?

Interest rates= Nominal Interest Rates here

When a country decides to increase it's base interest rates, bank rates and bond rates all change with near equal step also taking into account risk.

I was taught at A level that higher interest rates cause the currency to appreciate. Higher rates attract portfolios into domestic bonds and banks increasing demand for forex stimulating the exchange rate but....

The International Fisher Effect says a currency falls by the same % interest rates rise in an open economy, due to the fear of inflation causing people to flee the currency.

What I think so Far..Surely the fear of higher inflation cancels with greater returns on portfolios causing the demand for the currency to by similar when rates change. Is the overall fall due to the fleeing of government and corporate bonds which pay only a fixed coupon? I see this depends on variables and assumptions e.g how financially linked the economy is to overseas.

Explain how interest rates affect the currency of an economy. State you're assumptions and what you're solution depends upon