The article discusses how changes in real interest rates affect the value of the dollar in the foreign exchange market. It shows that when U.S. interest rates are higher than those of other countries, the dollar tends to appreciate. However, there are times when the dollar's movement doesn't align with economic fundamentals, suggesting that market perceptions of the long-term exchange rate can change rapidly due to factors like shifts in tastes and technologies. This can lead to short-term fluctuations in the exchange rate that are not easily explained by traditional economic indicators.