Is Currency Devaluation a cause or effect of interest rates?

• The bond market is a market, albeit following the lead of the central bank at the short end.
• The currency market is a market.
• The simplest and crudest version of the Efficient Markets hypothesis is that it is difficult to “beat a market” using a simple rule. The argument is that if such a simple rule exists, everyone would do it, causing prices to shift. (There can be regularaties like the term premium - bonds tend to outperform cash in the long run - but one needs to take risk exposures to achieve such gains.)

Taken together, the previous statements suggest that there should be no simple relationship between interest rates and currencies. If the previous logic is incorrect and such a relationship exists, feel free to use it to make a fortune as a currency strategist. (Disclaimer: this is not a recommendation to trade currencies without understanding the risks involved.)

Textbooks love discussing interest rate parity relationships. This is an arbitrage relationship used to pin down the pricing of currency forwards. However, the predictive power of forwards is at best weak, leaving us back near the possibility of efficient markets.

Finally, the exception to the bond and currency markets is the possibility of a pegged currency, or pegged bond yields (relatively rare). At which case, one needs to look at the behaviour of currency pegs, and runs on such pegs.