As I understand it, higher interest rates attract foreign investment; foreign investment encourages the appreciation of a particular currency vis-a-vis a currency with a lower interest rate because it involves demand for/buying of the former.
But why are foreign investors attracted by higher interest rates? Rather, which and what kidnds of investments become especially appealing when interest rates are raised? Are they purchasing government-issued debt securities?
To answer this question, it really depends on the country that is raising interest rates. Ypu have to consider the political and economic environment of that country also, which is fundamental analysis in forex.
If the country has 0.25% and raises it to 0.5%, against other countries that have 1% and above. Most likely the affects of currency movement will be lower than expected, however, if the 1% interest rate country decides to move it up to 1.25%, then all hell breaks lose sometimes 
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Anyways, most retail traders avoid trading the news and put more emphasis on technical analysis.
Hopefully this gives abit on insight, also, for practical use for forex, some traders do carry trades as a profit generating tool. It makes base currency more attractive if it has a higher interest rate against the quote currency if it has a lower interest rate you are trading, that’s if you swing trade.
It’s as Ben has described…
A perfect example is the AUD, over recent months (18ish) our Government has been trying to push down the Currency so Australian businesses can be competitive and (Export) overseas.
When the AUD was level pegging with the USD (ie ~$1 for $1, 2013), Australian manufacturing died… exports such as Mining (Ask _Bob), our car industry, wool, beef etc. virtually closed.
Western Australia, who’s economy relies heavily on mining, Minerals, Ore etc. nearly went broke…and is still struggling to move forward.
So when the AUD was equal to the USD It was just easier and more cost effective to buy overseas. (Asia US).
So in 2013 the Australian Government started to push the AUD down into the low $0.70’s against the USD… ie: AUD$0.72 = USD$1.00 and this worked for a while…because it makes imported goods more expensive and so the theory was that Australia would start to manufacture again. But Australian Banks, some of the most profitable in the world… (Including Reserve) have some of the highest interest rates in the world (ATM 1.5%) after the carnage of the GFC…
And so foreign investment in Australian Bonds, Real Estate, Mining etc. has exploded and has driven the AUD to ~$0.80 against the USD. ($0.80 appears to be the “Resistance” point for now…)
Note: A countries base (Reserve) Interest rates are used to slow or to speed up the economy.
Now inflation and wages growth in Australia has been flat for years but it is just starting to increase and the Government (Reserve Bank) wants to raise the interest rates (from historic lows) to somewhere near normal (~3.5%)
It is also fully aware that raising the rates will attract more investment in bonds etc. and the AUD will start to increase again making Australian business uncompetitive against the rest of our region (Asia)
Check the AUD historical price everytime our interest rates are raised .25% a huge surge in price of the AUD. Dates can be found here Cash Rate | RBA
Hope this “Case Study” a brief overview gives some insight to your post.
Hi @philip338, it is quite simple in “Classical Economic” terms - a currency has a value in relation to other currencies which moves about a bit. That’s what we are Gambling on - thse tiny movements.
Now if interest rates are raised in a Country, that means that Govt Bonds etc will pay a new interest rate based on the base rate, as @Ben1987 and @Trendswithbenefits have described. This attracts “money” (doesn’t matter where the “Money” comes from, it comes !
BUT it has other effects as well;
the price of previously issued Bonds at lower interest Rates Goes DOWN because their comparative yield is now less.
Also Banks now raise their internal “Lending Rates” so business has to pay more interest on it’s loans, which costs more and reduces profit. Share prices therefore reduce a) because profit and therefore dividend expectation are reduced. b) “Money” is selling shares to “buy” these new Govt Bonds.
Demand for Other countries Bonds bearing lower interest Rates is Reduced and they may be forced to retaliate to attract money to Their currency.
The effects on imports and exports are considerable - as @Trendswithbenefits explains.
It used to be the case that “Intereston savings” went up as well under the “Fractional Reserve ratio” banking system. But now in their wisdom, “Govts” (Well Uk and USA anyhow apparently) have reduced the “Reserve ratio requirement” to Zero, Banks do not need to have deposits in order to issue loans - they just “Type them onto a spreadsheet” - SO “Private individuals” lose all ways around - Higher prices, higher interest on loans and sod all interest on any savings they may have.
Just like “Forex” the whole “Banking industry” is devoted to “ripping off retail”
Hope that helps 
The morality of forex business is actually this. Based on the interest rate currencies of different country are bought, sold or exchanged. One particular currency from a country bought or sold or exchanged if trader got the higher interest rate form the other particular currency. But the interest rate of the currencies depends on many things. Which country currency will raise higher or which will goes down variable on country to countries global, economic, political or environmental environment.