Before turning to the connection between interest rates and exchange rates, let me note that the evidence does not confirm an increase in correlations in interest rate movements across world asset markets, at least in the 1990s compared to the 1980s. It is true that the levels of long-term interest rates in major industrial countries have tended to converge since the early 1980s.
But this is largely accounted for by a convergence of inflation rates. On the other hand, there is little evidence to suggest that correlations between changes in long-term interest rates across these countries have increased over this period.